Indian real estate: The cheers of 2022 will carry over to 2023

After recording a stellar housing market in 2022, the consensus view is that 2023 won’t be much different, except for a softening in office space leasing. Stakeholders point to a renewed sense of consumer ownership in the wake of the Covid-19 pandemic, increased confidence in income security and growth, and strong domestic macro fundamentals.

Kishore Reddy, a CMD real estate agent at MANA Project Pvt Ltd, highlighted: “Recession fears in advanced economies have driven investors to opt for the real estate sector as it appears to be the only one not affected by the current recession.”

New home sales in some of India’s top eight cities hit a record high of 3,08,940 in 2022, up 50% from 2,05,940 a year earlier, according to online brokerage Saransh Trehan, managing director of Trehan Group, another property developer, expects this demand to continue in 2023, driven mainly by end users, despite rising home loan rates.

Murali M, CMD, Shriram Properties Ltd believes housing demand is penetrating into second and third tier cities close to metropolises or located in industrial belts with investment potential.

Housing demand could contract if home loan rates rise above the 9.5% mark, according to a recent survey of consumer sentiment by real estate consultancy and services firm Anarock. Shriram’s Murali M warns: “I expect an overall (pricing) growth of 10% in FY23 and this trend is likely to continue in the next two years.”

According to a recent report by JLL India, office leasing in India’s top seven cities has grown by 46% year-on-year to reach nearly 39 million square feet (msf) by 2022. “Currently, 70% of the offices in this country are occupied by foreign companies,” Anarock Group chairman Arun Puri noted, warning that a US recession in 2023 would slow MNC (multinational corporations) leasing in India.

quick recap

Indian real estate sees a lot of cheers in 2022 despite global tailwinds.

Vivek Rathi, head of research at real estate consultancy Knight Frank India, acknowledged that property prices in the residential market have risen by an average of 4-8 per cent due to higher construction costs. The Reserve Bank has raised rates by a cumulative 225 basis points since May, adding additional pressure. However, demand remained strong due to upbeat consumer sentiment.

Moving away from the needs of specific locations, homebuyers have shown a preference for functional homes with added amenities. “Larger homes, separate floors and lots are the main sought-after or preferred options for homebuyers in 2022,” Trehan added.

Commercial real estate: the well-deserved runner-up

The commercial sector of the industry performed satisfactorily, supported by strong demand until September 2022. Demand was tepid in the final quarter of the calendar year amid recession fears in advanced economies. “The last quarter of 2022 is characterized by increasing caution and reticence by multinational occupiers,” Puri explained.

While the segment failed to surpass the 47 cubic feet standard achieved in 2019, Thirumal Govindraj, senior managing director at commercial space-focused real estate developer RMZ Corp, said it was a healthy sign given the continued mix of working patterns. many companies.

He added that the proportion of employees working from home has risen from 2019 levels, and companies are asking for more flexibility in office design and layout to accommodate expansion needs.

Foreign direct investment in the sector, which accounts for the bulk of funding in the sector, has failed to keep up with 2021 levels. Rathi highlighted that the figure was $5.1 billion, down 15 percent from the previous year.

affordability status

A Knight Frank India study of India’s top eight cities points to a year-on-year decline in affordability levels in the Indian market in 2022, triggered by rising home loan interest rates. However, affordability levels remain significantly better than pre-pandemic levels in 2019. Ahmedabad emerged as the most affordable housing market in the country, followed by Kolkata and Pune.

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