Outlook 2024: Defying challenges, Indian real estate scales new heights; steam remains

New Delhi [India], December 26 : The Indian real estate sector continued to scale new highs in 2023, defying the tightened monetary policy stance of the Reserve Bank of India (RBI), and also at a time when its counterpart in neighbouring China is in crisis.
In the initial Covid years - 2020 and 2021-- the real estate sector had borne the brunt as most of the outdoor activities were truncated, suppressing demand in the most crucial sector of the economy. Since 2022, it has come out of the troubled waters and has done relatively well in 2022 and 2023 with the growth outlook for the next year also projected to be robust.
"High-interest regime remained a non-deterrent on sales," said real estate consulting firm CBRE in a note.
As per CBRE estimates, residential sales in the January-September period of 2023 exceeded the 230,000 units mark, registering a growth of 5 per cent when compared to the same period last year.
"Sustained momentum in demand led developers to launch over 220,000 new housing units during January-September 2023, marking a marginal growth of 1 per cent. While mid-end housing continues to pillar overall residential demand, the traction in the premium/luxury category housing segment in 2023 has been noticeable," CBRE noted.
Looking ahead into 2024, it anticipates that the home-buying sentiment witnessed in 2023 will persist. Reputable residential developers are expected to continue to explore new cities, aiming to expand their portfolio and capitalise on their brand value.
Several real estate industry insiders also asserted that the housing sales in the country remained upbeat throughout 2023 and the momentum is expected to sustain at least into the initial part of 2024.
In 2023, the real estate sector also smartly manoeuvred the rising input costs and the cost of borrowing, and a likely recession in some advanced economies.
Going ahead, much will depend on monetary policy direction, as the sector is highly interest rate sensitive.
"Looking ahead to 2024, we envisage a horizon brimming with optimism and opportunity. A stable economic landscape, complemented by government initiatives in infrastructure development and an increasing emphasis on sustainability, is poised to propel the real estate sector to new heights," said G Hari Babu, National President of the National Real Estate Development Council (NAREDCO).
Reflecting on the year 2023, the national president of the apex real estate industry body said that the sector despite grappling with global uncertainties and economic challenges, emerged more robust.
"Remarkably, we witnessed unprecedented growth in housing sales, fueled by a steadfast demand for affordable homes, an impressive upswing in the luxury segment, and the transformative influence of technology," Hari Babu added.
Taking the thread forward, Saransh Trehan, Managing Director, Trehan Group, a developer, said Tier 2 and 3 cities will see rapid demand in 2024, supported by brisk infrastructural growth and a massive need for quality of life.
"While there is no doubt that 2023 has been a good year for the real estate sector, it is also fair to say the metro cities, Tier 2, and 3 cities have all seen great absorption rates in the case of the diverse range of property classifications. Gurugram underlines a euphoric increase in demand for luxurious independent floors characterized by low-density cohabitation, private settings, and better security functionalities than high-rise apartments and societies," Trehan added.
Aditya Kushwaha, CEO and Director at Axis Ecorp also maintains transactions as high as 40-45 per cent were in Tier II and III cities, driven by the potential for appreciation and the demand for larger living spaces amid rising remote work trends.
"As these cities undergo developmental transformations, property values are anticipated to rise, offering investors promising returns," Kushwaha said.
The RBI maintained the status quo in the repo rate for the fifth straight time at 6.5 per cent, though substantially higher than the pre-COVID levels, lending stability to both the buyers and developers. Now, there are indications that the central bank would start loosening the monetary policy stance in 2024, in line with manageable inflation levels.
Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
"In 2023, the Indian housing market witnessed a significant growth, marked by record-high sales. The surge in homebuyers can be attributed to rising demand for homeownership, stable finance rates, and good appreciation in the sector, making it an attractive investment option again," said Lucy Roychoudhury, Head of Sales, Marketing, and CRM of Runwal Group, a developer based in Mumbai.
Roychoudhury is of the view that the positive trend is likely to continue in 2024 as well. Kanjurmarg, Vikhroli, Powai, Mulund, Thane, and Dombivli are emerging as new high-demand areas in Mumbai.
"These locations (in Mumbai), near well-connected metro lines, are hubs with robust infrastructure, entertainment hubs, and thriving commercial centres," Roychoudhury added.
Anarock Group, a major real estate consultancy firm, also paints a bright picture for the industry, saying that residential demand remained at an all-time high across cities despite rising interest rates and global headwinds.
Average residential prices across the top seven cities in India increased in the range of 8-18 per cent in the third quarter of 2023 when compared to the same quarter of 2022, mainly due to an increase in the prices of construction raw materials.
"If we are to consider the current scenario, we may see an overall 8-10 per cent jump in average residential prices in 2023 as against the previous year. In 2024, we may see up to 12 per cent increase in average prices across cities, proviso the current momentum continues," said Anuj Puri, Chairman of Anarock Group.
"The Indian residential segment remained unstoppable in 2023. If we consider the trends in the first nine months of 2023, housing sales reached a new peak and were all-time high. To put in numbers, as per Anarock Research, the first nine months of 2023 saw total housing sales of over 3.49 lakh units across the top seven cities which is 96 per cent of the total sales recorded in the entire 2022 despite a rise in both interest rates and housing prices," Puri further said.