Will housing sales this festive season outpace last year’s numbers?

Steady interest rates and the ongoing festive season sentiment are expected to lead to housing sales in 2023 outpacing last year's numbers

Steady interest rates and the ongoing festive season sentiment are expected to lead to housing sales in 2023 outpacing last year's numbers. This is largely on account of aspiration for home ownership, desire to upgrade and status quo on interest rates being maintained, not to mention parity between sales and affordability.

The festive season in 2023 is set to break a three-year record in residential sales, exceeding the 1.5-lakh-unit mark in H2 of 2023, a report by real estate consultancy CBRE said.

The report, India Market Monitor Q3 2023, said that overall residential sales across price categories exceeded 2.3 lakh units between January and September, registering an annual growth of about 5 percent. In the second half of 2022, 1.47 lakh units were launched, against 1.14 lakh units in the first half of 2023. The report said that the luxury housing segment in India, comprising units priced at Rs 4 crore and above, maintained strong sales momentum, registering a 97 percent on-year increase in the January to September 2023 period.

Total sales of luxury units during the January-September 2023 period stood at approximately 9,200 compared to 4,700 units in the same period last year. Among the leading markets, Delhi-NCR, Mumbai and Hyderabad emerged as the top three dominating sales, jointly accounting for nearly 90 percent of sales in the segment across the top seven cities.

Thriving market

Another report by JLL, also a real estate services company, said that robust sales are expected in the ongoing quarter and are expected to surpass the 2.15 lakh units figure seen in the previous year. Residential sales of 1.96 lakh units were recorded in the top seven cities during the first nine months of 2023, almost 91 percent of last year’s total sales, according to JLL India’s Residential Market Update – Q3 2023.

Demand for residential apartments will be backed by a robust supply pipeline as developers announce new launches and enter newer markets including peripheral micro markets where infrastructure augmentation is in process or planned, it said.

According to Vivek Rathi, national director, research, Knight Frank India, a property consultancy, the housing market in the country is currently thriving in a favourable environment, buoyed by economic strength, heightened consumer interest in home ownership, a sense of optimism due to moderate property price growth and improved mortgage accessibility.

Nevertheless, there are some challenges affecting demand for home purchases, stemming from geopolitical events, a somewhat weak global economy, and higher domestic home loan interest rates. These factors have introduced an element of caution, particularly in the lower-end housing segment. However, the mid- and high-value housing segments are experiencing robust activity nationwide, he said.

“As we entered the festive season with Navratri, we observed strong sales trends in housing markets throughout the country. Notably, major markets like Mumbai reported a remarkable 37 percent increase in sales during Navratri 2023 compared to the previous year, indicating a promising festive period for the housing market in 2023 and a strong finish to the remainder of the year,” he added.

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 realty consultants 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 (the premium some builders impose on apartments on higher storeys, typically above the fourth floor) 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.”

Festive cheer

Colliers noted that while home loan equated monthly instalments 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.

According to Pankaj Kapoor of real estate data analysis firm Liases Foras, housing sales are expected to remain robust this festive season across markets. Sales and new launches have both increased by 11 percent. “If the residential market achieved a 9 to 11 percent growth last year, it is expected to witness a growth of 11 to 15 per cent this year,” he said, adding on an all-India level, sales were around Rs 3.45 lakh crore last year and are expected to touch around Rs 4 lakh crore this financial year on account of the real estate markets being in the middle of a productive cycle.

According to a real estate consultant the overall sales velocity this festive season is better than last year. “This is largely on account of aspiration for home ownership and the requirement to upgrade.”

“Their purchase plans have to match as well,” he added.

However, he pointed out that it is not that buyers would wait to buy only during the festive season.