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Home Prices Up On Strong Demand; Mumbai, Bengaluru In Lead

Home Prices Up On Strong Demand; Mumbai, Bengaluru In Lead

Global markets have been reacting in the last couple of years. Where some escalated quickly, some thrived. However, one of the biggest fund parking lots – real estate, displayed fascinating data with respect to emotions, price play, and demand supply.

A report from The Economic Times suggests that the property markets across India are witnessing appreciation in residential prices supported by robust uptake in sales owing to the realisation of the need for housing among homebuyers, lower interest rates and a quick rebound in economic activities post waves of Covid19 pandemic. Housing prices have grown in year-on-year terms during the first half of 2022 across all markets for the first time since the second half of 2015.

Housing prices increased across the top 8 markets in the range of 3%-9% from a year ago in the first half of the year ended June, with some of the larger volume markets registering notable growths. While Mumbai and Bangalore led the price increase with a 9% raise each, the National Capital Region and Pune recorded a 7% increase each, showed data from Knight Frank India.

Yearly Figures

With sales of 158,705 units, the first half of 2022 posted the highest sales volume since the second half of 2013 for any half-yearly period. Sales registered an on-year growth of 60% in the first half of 2022.

Ramesh Ranganathan, CEO of K Raheja Corp Homes, said, “Improved economic confidence, healthy income growth, the now declining pandemic which has stimulated the need to own a home, have all worked in favour of home sales. Despite the two successive rate hikes by the RBI towards the fag end of the first half of the year, interest rates are still lower than in earlier times. Input cost pressures have been there, but the market has absorbed it well, which is reflected in both sales and price growth,”

The robust volume in sales has significantly increased real estate prices across all markets homebuyers’ need to upgrade their primary lifestyle, low-interest rates and comparatively low home prices to the pre-pandemic levels, along with the renewed need for home ownership sparked by the pandemic, have been the primary drivers for this growth.”

Developers also strategically responded to the demand momentum and the shift in sentiment and launched 160,806 units in the first half of 2022, up 56%. This is an 8-year high in terms of launches for any half-year period.

Despite a higher number of launches, strong growth in sales velocity has led to a modest decline in unsold inventory, which level dipped marginally to 440,117 units as of June end and also brought the Quarters to sell (QTS) level down to 7.8 quarters from 10.9 quarters a year ago.

Movement In The Major Hubs

Mumbai, Delhi-NCR and Bangalore contributed the most to the sales activity. The country’s financial capital’s sales volume of 44,200 houses accounted for 28% of the total sales amongst the top 8 cities, the highest among all markets.

Delhi

In terms of annual percentage increment, NCR witnessed an increase of 154%, with a sales volume of 29,101 units. Besides being the biggest mover, NCR accounted for the second-largest share of sales among the eight markets in the country.

Bangalore

Bangalore had a similarly strong performance with annual sales growth of 80% in the first half of 2022 to 26,667 units as increased hiring and steady income growth in the Information Technology (IT) sector-dominated market also buoyed homebuyer demand.

The Price Brackets

The share of sales of Mumbai, homes costing over INR 1 crore and above grew to make up 25% of sales in the first half of 2022 compared to 20% a year ago. This can be attributed to the homebuyers’ need to upgrade to larger living spaces with better amenities and to the fact that pandemic-induced income disruptions did not impact higher income categories as they did for the others. On the contrary, the share of homes in the ₹50 lakhs to ₹1 crore category declined to 34% as against 39% a year ago. The ₹50 lakhs and below category declined marginally to 40% from 42%.

The Commercial Story

On the office market performance, all the top eight cities recorded transactions of 25.3 million sq ft during the first half of 2022, whereas the office completions were recorded at 24.1 mn sq ft in the same period.

Bangalore and Pune office markets recorded maximum annual growth in rental value at 13% and 8%, respectively, owing to higher demand. Hyderabad, Mumbai and NCR also witnessed a moderate increase in their rental values, whereas the rental values in Chennai, Ahmedabad and Kolkata.

These movements are a result of a collaborative market mood equipped with many factors aligned and related to global differences, emotional perceptions, and economic reforms.