Real estate market on the boil but homes will still be ‘affordable’ in 2024

• Positive economic data, lowering inflation and timely project completion is expected to drive home sales in 2024 too.
• The possibility of interest rate cuts in 2024 can be another driver for residential home sales.
• Hybrid work policies, love for amenities and community living will determine choice of homes.
• Changing lifestyle preferences of tier-2 and tier-3 consumers expected to drive more branded home developments from Chandigarh to Coimbatore.

Indian home sales are all set to hit a 15-year peak in 2023, with over 3 lakh residential units purchased. Come 2024, they will go higher as lower inflation will push more fence-sitters ahead in addition to all around positivity around the Indian economy.

There is also another key factor that will drive more people to buy homes. Grade A developers who are completing their projects on a war-footing, providing a supply of new-homes.

“Timely project completion is giving a major boost to overall consumer sentiments, and they are coming forward to take the plunge,” Anuj Puri, chairman of real estate consultancy Anarock group, tells Business Insider India.

Pricier yet affordable

Residential home sales for the ongoing festive quarter have been 30% higher than that of 2022. Thanks to heavy demand and new launches, the prices of homes have also been going up. A few micro-markets, in and around the tech hubs of Hyderabad, Bangalore and Pune, prices have shot up by anywhere between 25-33%.

“Capital value growth is expected to witness divergent trends across micro-markets and property categories and will largely be governed by unsold inventory levels and inventory overhangs,” says Anshuman Magazine, chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE.

Whitefield in Bangalore, Gachibowli in Hyderabad and Wagholi in Pune are some of the micro-markets that have seen good price appreciation. Overall, across the top 7 cities, the average growth in property prices has been anywhere between 8-10%. As per Anarock, it’s expected to see at least 12% increase in 2024.

Emerging infrastructure is also expected to push for price growth. Mumbai Metro Connectivity in the western suburbs has pushed up the housing demand in the Andheri-Borivali belt significantly.

“With the backdrop of tremendous infrastructural development going on in full swing across the cities and states, we foresee the emergence of newer micro-markets as well as the strengthening of the existing ones. Similarly, the demand for housing in other cities and peripheries is expected to grow, owing to the phenomenal connectivity boost, leading to price growth across the targeted micro-markets,” Dhaval Ajmera, director, Ajmera Realty tells Business Insider India.

While home prices might turn pricier, there is a chance that the net costs of home buying may go down if interest rates ease. The central bank has kept base interest rates unchanged for the fifth consecutive time in December. A few experts hope that a lower interest rate cycle might kick off in the coming year.

"In 2024, we are likely to see a renaissance with affordability levels expected to be on an improving trajectory as macroeconomic fundamentals support a repo rate reversal and thereby interest rate reduction that could provide another fillip to the residential sales market," said a JLL report Home Purchase Affordability Index' (HPAI).

The depreciation of the rupee against major global currencies, together with stable economic conditions in India is also a factor.

"A notable trend has been the heightened interest in Indian real estate from NRIs. The advancement of technology has streamlined the process of property management from far away which has boosted NRIs confidence in Indian real estate as an avenue for investment, said Saurabh Garg, Co-founder & Chief Business Officer, NoBroker.

Space not price is the criteria

Indians’ love for spacier and larger homes might not go away and are ready to shell out more. The lockdown-era love for people needing more space will not reverse as fast as companies went back from work-from-home policies.

Lingering hybrid work policies are expected to keep people yearning for workstations inside homes that support remote work and flexi-living. It indicates a long-term shift in behaviour.

“Buyer demand for large homes is still high, even in light of impending changes to laws about remote work. This tendency is anticipated to continue, reshaping the real estate market in 2024 as people look for homes that strike a balance between comfort, usefulness, and adaptability to changing work environments,” said Manju Yagnik, VC of Nahar Group.

Indians will no longer base their home buying decisions on affordability alone. More factors have come into play like health & safety, community living, sustainability, and integration of smart home technologies.

“Home buyers are expected to continue to display strong preferences for projects which offer enhanced accessibility to essential infrastructure, ancillary amenities and thoughtfully designed indoor and outdoor spaces – which will propel the demand for this segment going forward,” says Magazine.

Emerging tier-2, tier-3 opportunity

Growing affluence in smaller cities and towns is also building demand for branded homes. Many developers will be going beyond top 8 cities where demand for amenities-driven homes is going up. Most of this demand is seen in tier 2 & 3 cities such as Lucknow, Jaipur, Ahmedabad, Coimbatore and Chandigarh.

“What aids the real estate market in these smaller towns and cities is their affordable prices as against big cities and the superior infrastructure that many of these Tier 2 and Tier 3 cities provide,” said Chitnis.

There is a lot of home-buying interest by NRIs in such cities too, especially Kochi and Ahmedabad. That’s where a chunk of the new demand for the coming year will come from.

These regions provide profitable prospects for developers and homeowners, say developers.

“Our prognosis for continued development is positive beyond the top 7 and 8 cities. We anticipate a spike in major branded properties due to growing demand and promising development opportunities in emerging economies. This growth is driven by greater connectivity, changing lifestyle preferences, and infrastructure developments,” says Yagnik.

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