In 2022, the Indian housing sector withstood the headwinds from many crises and inflationary perils. Today, the real estate sector is at the confluence of growing real demand for homes, increased cost of borrowings, and increased costs of development due to supply-chain glitches.
The reappearance of fatigue in economic growth calls for a lot of work in 2023 to sail past the problems. Diminishing pandemic tailwinds, even with the China upsurge, should enable an economic reset. A conducive environment can foster real estate growth, allowing it to become a $ 1 trillion market by 2030 at a faster pace.
The outlook for India’s real estate sector undoubtedly remains sanguine. There could be some short-term risk contamination, but the housing sector is all about having a long-term view, given the nature of the asset.
Currently, the industry is well enabled for growth, with improving private capex, foraying of branded players into new micro-markets, developers assessing new financial models to diversify into the new asset classes, investor’s interest in housing as a safe asset seeing a revival, the strong emergence of millennials as first-time home-buyers, and the revival of luxury housing.
The good performance of the Indian property market is attributed to nudge factors like a conducive interest rate regime, rise in consumers’ purchasing power, improved home affordability index, stronger sentiments on home ownership, and increased share of bank credit in the retail home-loan segment. The increase in property prices and rentals validates the upward growth trajectory predicted for the housing segment. It is anticipated that the tapering of monetary tightening in FY 23, with a calibrated fiscal intervention, will lead to a balanced economic outlook.
Today, balance sheets are healthier as companies have successfully deleveraged and have healthy equity-debt ratios in the wake of market consolidation. Developers are evaluating new models for a swift turnaround of projects that could enable a safe exit. A sustained growth rate can be achieved by being prudent, in terms of not being ambushed by an overhang of unsold inventory.
There has been an accretion of housing demand in metropolitan regions and even tier II cities due to a spurt of job opportunities, mushrooming of business districts, and well-planned infrastructure development. The revival in rural consumption is powering housing demand. The government’s impetus to housing through the Pradhan Mantri Awas Yojana and affordable rental housing is helping the country achieve the target of housing for all. The fast-tracking of slum rehabilitation and redevelopment projects will grant fresh energy to urban real estate growth in the metropolis.
The pandemic has deeply altered the customer’s behavior and preferences. The discerning home-buyers are now skewed towards a transformative lifestyle, wanting better integration of space and service management. New projects are well-curated, factoring in a revamped customer demand relating to experiencing holistic living at an affordable price point. The demand for luxury homes will flourish as HNIs move to upgrade their lifestyle quotient with enhanced amenities, privacy, and comforts. NRI home-buying will continue to grow, thanks to currency depreciation and conducive market dynamics amid geopolitical uncertainty.
The alarming climate crisis has set the conscious-consumerism strategy in motion. The change in building codes and laws relating to the use of eco-friendly materials, waste recycling, and energy efficiency will be in sync with the housing sector’s ESG focus, including in ratings. Investors and consumers are cognisant of investing in sustainable assets to get better yields.
The sector pegs its hope to tax harmonisation for home-buyers and the granting of infrastructure status to it for cheap, long-term funding and boosting rental housing in the upcoming Union Budget. Course-correction measures, such as improved governance, streamlining of regulatory compliances, and periodic policy restructuring, will ensure cost-effective and timely development of the real estate sector. Integration of innovative technology, digitalisation, and automation is new growth wheels for fostering unrivalled customer experience. The constant upskilling of the workforce will equip the real estate industry with the best professionals.
India is on the cusp of a revolutionary growth cycle that includes advanced employment and investment opportunities. Globally, the performance index of the real estate sector is taken as an index of economic growth. Hence, compounded growth for the real estate sector will script the rise of Atmanirbhar Bharat, as a true economic superpower.
Author is Vice chairman, National Real Estate Development Council (NAREDCO)