Housing sales , which remained upbeat throughout 2022, will sustain the momentum at least into the first two quarters of 2023, but thereafter, it could see a contraction.
“The year 2023 will continue to witness controlled new launches in most of the top cities. The launch trend in 2022 was calculated caution, with developers refraining from putting more inventory on the market than it could reasonably absorb – especially in already abundantly supplied markets,” says Anarock Group.
Anarock’s most recent Consumer Sentiment Survey show that if home loan interest rates rise above 9.5 per cent, it could lead to a “considerable contraction in housing demand.”
“Much will depend on forces other than the desire for homeownership, such as additional repo rate hikes and property price increases. 2022 saw the repo rate go up by almost 225 basis points (bps), and home loan interest rates lost no time in going up concurrently,” says Anuj Puri, chairman, Anarock Group.
Incidentally, the growth in the segment can also be attributed to the Pradhan Mantri Awas Yojna, under which Rs 48,000 crore was being allocated to complete approximately 80 lakh houses by 2023.
In addition, state governments have also taken decisive initiatives to resurrect market demand after the pandemic.
For instance, initiatives such as SWAMIH that helps fund stalled affordable housing projects will further encourage affordable housing developers to expand the segment in the coming year.
“Affordable housing finance will grow the fastest, with mortgage penetration expected to double to 8-10 per cent over the next few years,” says Pradeep Aggarwal, founder and chairman, Signature Global (India) Ltd.
That said, the Delhi national capital region (NCR), a market once notorious for chronic oversupply, saw restricted new supply, which played a major role in reducing unsold inventory there. Since this cautious approach worked well in 2022, it is expected to continue in 2023 as well.
An imminent US recession in 2023, if it unfolds as it seems possible now, will also impact housing demand in India at least marginally.
Reduced flows of IT/ITeS work outsourced to India and further layoffs will also leave their mark on residential absorption here.
Apart from the fact that IT employees contribute a sizeable chunk of the housing demand here, hawkish federal rates have a visible impact on Indian stock markets.
Reduced stocks earnings suppress the appetite for discretionary spending and making long-term financial commitments, especially in the cost-intensive housing sector that stays afloat on home loans. Developers have already factored in this possibility, causing them to hold an even tighter rein on new supply until more clarity emerges.
Ready-to-move-in housing will continue to draw most of the demand in 2023. The focus of buyers opting for new launches will not waiver from projects by leading and listed players.
Vikas Chaturvedi, CEO of Xanadu Group, a realty tech business accelerator firm says that the industry will have to learn to provide smarter solutions that excite a consumer.
“We believe that the current upward trend will continue in FY 2023 too,” he says.
