Though real estate had a robust run in H12024, the decline in home sales in the third quarter in the wake of high property prices has dampened the festive mood . That the much anticipated interest rate cut did not come through at the beginning of the festive season has further subdued the buyer sentiment. So, in the backdrop of this, the big question is -Will festive fireworks light up Diwali or subdued and stabilising home sales may steal the festive shine .
Much to the delight of investors, prices have been rallying across top 8 cities. But it has been a pain point for end-users especially the price sensitive segment of affordable and mid-segment homebuyers. Particularly, in Delhi-NCR, this price rise has been quite steep. PropTiger.com puts this price rise in Q3’24 at 57% YoY.
Despite positive consumer sentiment and yearning for home ownership, this runaway price rise has taken its toll on housing sales.Anarock Industry statistics show that overall housing sales in Q3 across 7 top cities declined by 11%. NCR, a leading residential market saw 6 percent qoq decline in sales. So much so that even Tier 2 cities generally considered affordable have faced the brunt. PropEquity data reveals that sales in top 30 Tier 2 cities have fallen by 13% in the September quarter. As such the affordable housing buyers looking to buy in Tier 2 cities or in the suburbs of Tier 1 cities, are a harried lot. Further, the low-supply of low-cost and mid-priced homes has limited the choice of prospective homebuyers. Rising land prices and construction costs have made it difficult for developers to construct such homes due to low margins. So, they are drawn to luxury /super luxury homes which offer high profits and are lapped up by HNIs, UHNIs and investors because of high returns.
Real estate experts like Samir Jasuja of PropEquity attribute the decline in home sales to a high base in 2023 which saw record sales and new launches. Despite industry’s bullish projections of a 20-30% rise in housing sales during the festive quarter, the sales in December quarter may well remain muted on account of high prices , no cut in interest rates and muted launches as several new projects are awaiting RERA nod. There are not enough outright price discount offers to soften the impact of high prices. Many prospective homebuyers may defer their home purchase decision till early next year when the rate cut takes place. In the light of all this, this time we may not see double-digit growth in the festive season.
Notwithstanding all this, real estate has a long term positive outlook on account of a supporting economy ,increasing disposable income and manageable unsold inventory amidst demand outstripping supply. With stabilising prices and improvement in affordability following the expected rate cut in the last quarter of FY25, going forward we will see healthy and sustainable growth of real estate.
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