Housing Supply Doubles Up YoY Owing to Multiple Factors

Low home loan interest rates fuelled the country’s homeownership appetite despite the Omicron wave. And the developers took complete advantage of the same to exploit opportunities. Residential property supply in India’s main seven metro urban communities showed a twofold development, YoY, in the quarter finishing March 2022.

As per 99acres Indian Real Estate Report Jan-Mar 2022, more than 500 developments were enrolled under Real Estate Regulatory Authorities across the best seven metro areas, an increment of nearly 60% when contrasted with the relevant quarter in the earlier year. Home sales and new inventory saw a rise across the top metro urban cities in Jan-Mar 2022 in the midst of financial markers flagging a general recuperation in India. Western business hubs of Mumbai, Pune and Ahmedabad stood out with almost 78% of the fresh supply, while Delhi NCR limped along with insignificant introductions. Southern business sectors like Chennai, Bangalore and Hyderabad represented around 21% of the pie. The new inventory incorporates the new launches as well as under-development residential communities enlisted under RERA in the quarter finishing March 2022.

Drivers Of The Spiked Housing Supply In Q1 2022

Demand and liquidity

In the midst of a financial vulnerability that weighed more on supply during the period beginning March 2020, project launches have shown a serious downfall since. Nonetheless, Q3 (Jul-Sep) 2021 witnessed launches displaying a complex expansion in numbers on the tail of further developed liquidity conditions and low home loan interest rates. The restoration in home buying request likewise assisted realtors with keeping a confident stance with respect to new development launches.

In the midst of a noticeable difference in approach towards homeownership among customers post the pandemic, especially for 2 and 3 BHK luxury homes, realtors put forth attempts to offer better residential options from Q3 2021 to the beginning of festivals. The property seekers’ demand prevailed, as seen by the curiosity about under construction and finished projects. Therefore, the new inventory showed a leap in every one of the significant urban areas that went on in Q1 2022. The energy went on as the Union Budget 2022 reported a cost of Rs 48,000 crore for Pradhan Mantri Awas Yojana (PMAY) for metropolitan and rural residences in FY2022-23.

“During the period Jan-Mar 2022 Mumbai recorded a 20% YoY growth in housing sales. Property buyers preferred 1 BHK and 2 BHK properties starting from Rs 60 lakh. Additionally, competitive home loan interest rates and the proposed hike in stamp duty starting April 2022 encouraged buyers to close deals and register their properties quickly.”

– Sushil Dabria, Proprietor, Sushil Enterprise, Mumbai.

Moving towards recovery

Housing deals across the main eight metro urban communities expanded by 8% to 10% QoQ in Q1 2022, attributable to the subsiding effect of Omicron and a critical decrease in COVID cases. New projects engaged upper gears. Nonetheless, an uprising in the costs of development raw materials kept the guard up for real estate professionals in Mumbai, and Delhi NCR were cautious about rising development costs.

“The real estate industry has seen consolidation during the pandemic. The reputed and financially sound developers have been able to pour concrete and launch new projects. Moreover, reduced stamp duty, low-interest rates, and the rising concept of homeownership amalgamated to ensure demand remained robust. However, increasing costs due to rising commodity and fuel prices are adversely impacting project profitability, forcing developers to increase prices across the board”

– Ramesh Ranganathan, CEO, K Raheja Corp Homes

“Over 80,000 units were added in Jan-Mar 2022 in Mumbai Metropolitan Region (MMR), Delhi NCR, Bangalore, Chennai, Pune, and Hyderabad. The numbers may vary from report to report, but the trend in demand remains clear. The major reasons include pent-up demand post-COVID, preference for bigger houses or independent houses, and plans to own houses availing low-interest rates. Additionally, most of the completed units lack facilities that are necessitated due to the COVID experience. But the newly launched houses have flexible workstations in line with the trend. Some even have flexible mini home theatres and specifically designed balcony gardens. Also, buyers perceive that against inflation, real estate is among the better hedging investments alongside shares and gold. Further, on the flip side, some of the developers are still launching new projects so as to leverage the trend in demand.”

– Kishore NK, Director Finance, BEKEM Infra Projects Pvt Ltd, Hyderabad.

How Will The Lending Rates Affect The Ownership Tread?

“The pricing flexibility is evident for the builders as they will factor in the increased material costs and borrowing rates. On the demand front, the increase in the interest rate may discourage the buyers to an extent as they have to rework their budgets. However, on the positive side, the indications that the interest rates will further increase by another 50-75 basis points (bps) could persuade the buyers to advance their home buying decisions. However, the same indication may dissuade some buyers who may defer their buying timelines. In any case, the sudden rise in lending rates by 40 bps did not go well with either the builders or the homebuyers. All they wished for was a gradual increase if at all the increase is warranted to address the adverse impact of the unrelenting inflation.”

– Kishore NK, Director Finance, BEKEM Infra Projects Pvt Ltd, Hyderabad.

The residential curiosity in India will be effectively influenced concerning the moves of the banking systems in the country despite the recovery post the pandemic downfall.