Introduction
2022 has been a remarkable year for the Indian real estate market, with a surge of 68% YoY in home sales. Tier 2 and Tier 3 cities have become popular real estate trends, with an increase in affordable housing. The sector’s sustainable growth is attributed to increased awareness of home ownership, earning potential, and aspirational consumers. Read on to explore the trends and forecast for the Indian real estate market.
Progress of the Indian Real Estate Market in 2022
The rapid growth of the Indian real estate market has been a prominent feature for the last few years. With new records being set and trends emerging, the sector has witnessed an unprecedented surge in 2022, making it one of the fastest-growing industries in the country. While sales in the luxury residential market scaled by 68% YoY in 2022, Tier 2 and Tier 3 cities arose as fresh major trends in the industry. Moreover, the increasing awareness of home ownership and favourable affordable housing schemes has led to significant growth in the affordable housing segment. The growth factors in the real estate sector point towards a sustainable expansion, driven by an increase in earning potential, a need for a better standard of living and a growing base of aspirational consumers.
The sales records of 68% YoY set in 2022 signified the remarkable progress made by the Indian real estate market. As the second wave of COVID-19 receded, the industry continued its growth momentum from 2021 and set new benchmarks. The unprecedented growth in Tier 2 and Tier 3 cities indicates future urbanisation trends happening outside the primary cities. Moreover, the affordable housing segment witnessed significant growth, fuelled by an increase in disposable income and incentives provided by the government. The increase in demand for sustainable homes in well-developed suburban and semi-urban cities further contributed to the growth in this segment. With growth in demand, the real estate sector moved towards a sustainable expansion, driven by an increase in earning potential, a need for a better standard of living and a growing base of aspirational consumers.
Sales records of 68% YoY and Tier 2 and Tier 3 cities as major trends signify the growth of the sector while the increased awareness of home ownership and growth in affordable housing have contributed to the sustainable expansion of the industry.
Market Trends and Future Outlook
The Indian real estate market has emerged as one of the fastest-growing industries, with fresh trends shaping the sector with each passing year. In 2022, the market witnessed an unprecedented sales record of 68% YoY, and this growth momentum is expected to continue in the coming years.
Of all the segments, luxury residential sales recorded a staggering 151% YoY growth in Q1 of 2023. In contrast, flexible workspace emerged as the biggest contributor to demand, accounting for 27% of the total demand. Furthermore, the affordable housing segment has seen tremendous growth in recent times, driven by increased awareness of home ownership and favourable government policies towards affordable housing.
Private equity investment in the real estate sector reached US$ 3.27 billion between January and July 2022. Residential real estate sales in the top eight cities surged to ~308,940 units in 2022, while the retail real estate segment attracted institutional investments of US$ 492 million. Institutional investment in Indian real estate grew by 7% YoY in Q3 of 2021, and the first nine months of 2021 witnessed an inflow of US$ 2,977 million as against US$ 1,534 million in the same period last year.
The prospects for different segments of the real estate market in India remain positive, with the residential and industrial segments expected to grow steadily. Apart from the growing demand for flexible workspace and premium housing, the retail real estate segment is also expected to perform well in the coming years. Government schemes promoting the growth of the real estate sector, such as the introduction of affordable rental housing complexes, are also expected to boost the market.
Overall, the Indian real estate market is expected to maintain its growth momentum in the coming years due to soaring demand for affordable housing, increased investment inflows, and government policies promoting the growth of the sector. While policy changes may impact home buyers’ ability to invest in the short term, the market is expected to continue to be driven by demand and supply dynamics, regulatory framework, and overall economic conditions.
Impact of Policy and Regulations on the Real Estate Market
In recent years, the Indian government has made some significant policy changes and implemented regulations to promote sustainable growth in the real estate sector. Reforms in stamp duty, the introduction of affordable rental housing complexes, and government-aided schemes have been instrumental in providing relief to the many who previously had no access to the housing market. These initiatives have boosted the affordable housing segment and created new opportunities for those looking to own a home.
However, the increase in the repo rate has made borrowing more costly, leading to higher EMIs and decreased affordability. It is essential to understand the impact of this policy on the market and advise clients accordingly. Despite this rise in cost, the real estate market continues to be driven by other factors such as supply and demand, regulatory framework, and overall economic conditions.
To address these concerns, the government has undertaken measures to restore EMIs to the same level by lengthening loan tenures. These measures will help in keeping the market stable while also maintaining financial stability. In conclusion, policy changes and government initiatives have been instrumental in promoting the growth of the real estate sector in India, and with the restoration of affordable borrowing options, we can expect the market to grow even further in the coming years.
Expert Opinions on the Future of Real Estate Market in India
With a bullish outlook for the residential market in most cities and steady demand in the office, retail, hospitality, and industrial real estate segments, the need for early-stage real estate investment is high. Investors are turning to AIFs and HNI investors to fund growth. RBI’s monetary policy aimed at controlling inflation and maintaining economic stability will impact home buyers with higher EMIs and a decrease in affordability. Institutions have taken measures to continue providing relief to consumers by lengthening loan tenures.
Conclusion
In conclusion, the remarkable growth of India’s real estate market in 2022 can be attributed to a combination of factors such as increased demand for affordable and premium housing, growth in Tier 2 and Tier 3 cities, and investment inflows in the private equity and real estate sectors. The market is also expected to witness strong growth in flexible workspaces, retail, hospitality, and industrial real estate segments. While policy changes and regulations may impact the market, experts remain bullish about the long-term prospects of the real estate sector in India.
