Almost 40 percent of annual sales of residential units take place in the last quarter of the calendar year, especially during the festive season, when developers and financial institutions lure buyers with offers, according to an analysis by Colliers.
“Typically, Q4, marked by a higher inclination of homebuyers to wrap up property purchases in the festive period and instantaneous liquidity benefit aided by developers offering attractive discounts has historically provided the final push to residential activity,” said Badal Yagnik, Chief Executive Officer of Colliers India.
While developers come out with discounts, flexible payment options and lower floor rise charges, financial institutions offer homebuyers processing charge waivers and one-time interest rate reductions by a few basis points. The festive season seeks to provide one last thrust to residential real estate sales in India, the analysis of trends in eight urban zones said.
“Close to 40 percent of the annual residential units sold achieve closure in the last quarter of the year,” Yagnik said. “Industry consensus is indicative of 2023 housing sales already reaching close to 2022 levels and given the ongoing festive season, 2023 is likely to witness 20 to 30 percent higher sales as compared to 2022.”
The eight cities taken up for analysis were Ahmedabad, Bengaluru, Chennai, the National Capital Region, Hyderabad, Kolkata, Mumbai and Pune.
Timing of property purchases
Circle rates and property guidance values, akin to registration charges, determine the timing of property purchases to a large extent. A typical Indian homebuyer factors in such regulatory changes, which are more prevalent at the end of the calendar or fiscal year and advance or abstain from outright purchases accordingly, according to the analysis.
The ongoing festive season, which peaks on Diwali on November 12, is all set to provide a further fillip to residential property sales, which has been on an upswing all year. New launches, bumper discounts, tie-ups between developers and home furnishing companies, innovative payment options and targeted marketing campaigns are all the flavours of the season, it said.
Colliers noted that while home loan EMIs have a role in swaying home buying behaviour, the impact was less pronounced for aspirational buyers. A low correlation between home loan disbursements and repo rate changes indicates that residential segment activity in India is governed more by the sense of identification and belonging that comes with home ownership rather than fleeting financial gains brought in through interest rate changes.
Buyers with serious intent are likely to stretch their budgets to purchase homes that align with their desired identity and lifestyle, it said.
It observed that on average, a homebuyer goes through at least three business cycles during the tenor of the home loan and the benefits arising out of interest rate movements get rationalised over time.
“Interest rate trends are cyclical in nature, making end-users less sensitive to fluctuations in interest payments over a 10-20-year period. Homebuyers are more likely to alter the location, stage of construction, ticket size, unit size, preference of developer and bouquet of amenities in the housing society, rather than hasten or delay the purchase decision itself,” said Vimal Nadar, Senior Director and Head of Research at Colliers India.
Traditionally, the July-September period is the weakest for real estate sales because of the monsoon and other factors, while the last quarter is the strongest, fuelled by festive demand.
This year, too, it will be no different, said Mohit Jain, Managing Director of Krisumi Corporation, an Indo-Japanese real estate venture.
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