Consumer demand for bigger homes in Mumbai is rising — is a price hike on the cards?

This festive season, the Indian home buyer has never had it so good. Indian real estate, especially the sales in residential segment is back near pre-pandemic levels and increasing on a month-on-month record basis. In some select regions, the number of residential units sold is said to be at decadal highs. An accompanying uptick in the realty stock prices indicates that the overall trend of realty resurgence is not a flash in the pan occurrence but a trend supported and ratified by fundamental on-ground realities, which should give the prospective home buyer further confidence.

So, what does this portend for the future homebuyer? To better understand these phenomena and their implications for the home buyers, one needs to examine them in detail.

So, what does this portend for the future homebuyer? To better understand these phenomena and their implications for the home buyers, one needs to examine them in detail.

Resurgence in home buying, backed by ground realities

A recent CII-ANAROCK joint study reveals that the sales of residential properties in the top seven cities in H12021 were 43% higher than in H12021. In terms of new launches as well, H12021 saw a whopping 130% change. As per a report by Knight Frank, in September, the registrations were 87% higher compared to the pre-pandemic period of September 2019. And experts believe this momentum will continue in the festive season.

What is driving the demand?

The demand is also fuelled by factors like the lowest-ever interest rates for housing finance loans and easy availability of credit for the home buyer. The Government too has granted a concession to the realty sector to tide over the pandemic-induced slowdown with regulatory tax and duty cuts. While this has provided encouragement for the buyers, it has also enhanced government coffers in these tough times.

Another significant catalyst of this demand is the fact the tier II and III developers laden with credit crunch due to the NBFC crisis are increasingly aligning themselves with tier I players. The homebuyer is happy with this consolidation and willing to pay a premium to deal with a tier I developer, as he is assured of the product quality, additional amenities, and timely delivery without any cost overruns.

The other important factor at play is the improvement in capacity for a homebuyer looking to purchase property. The Covid-19 induced lockdown led to cautious spending on essentials and curb on non-essentials during this period, and hence prospective homebuyers have a potential surplus funds to allocate wisely.

Increasing demand for bigger houses

A recent Magicbricks PropIndex Report Q2 shows that the increase in home sales in Mumbai in the second quarter was primarily of 2-3 BHKs registered, and this was 10% higher compared to Q1 and 18% more on a YoY basis. Experts opine that the main underlying driving force of this phenomenon is the success of the ‘Work From Home’ (WFH) experiment. Having experienced the flexibility and commute-less remote work, the home buyer in Mumbai now prefers bigger homes to accommodate their remote hybrid WFH model. And not just WFH, even children’s online schooling is set to become a norm and hence one needs to factor the need for additional space. Consumers are also looking at houses set in an integrated set-up, that are well managed and are equipped to take care of all basic necessities.

Demand fuelled price rise

With increasing demand from new home buyers, developers are seeing a trend of declining ready-to-move-in inventory and are resorting to more new launches to fulfil this opportunity. Many developers have already successfully passed on the 4-5% increase to offset inflation and liquidity issues to their buyers. With increased demand, the sales tempo is likely to further pick up fuelled by various demand drivers. Experts predict another 4-5% hike in costs of residential properties for the new homebuyers in the near future, albeit a rise that is in-line with the income growth in the country, so that affordability is not impacted.

Buy your dream house now!

Lower rate of interest, availability of good homes from Grade A developers, choice of inventory, are among some factors that makes this the right time to buy your dream home. Given the backdrop of inflation concerns, there is an uncertainty about the continuance of the low interest rates, and the increasing home demand might lead to rise in home prices in the MMR region.

The pandemic has brought forth the importance of owning one’s own home. As is with any investment, timing is crucial and the time seems ripe to research and put through to action to owning your dream home.

Disclaimer: This is a sponsored article in partnership with Lodha Group

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