Housing Demand in India: Despite inflation and rising interest rates in the Indian real estate market, property prices have continued to rise since the beginning of this year. Ever since the lockdown restrictions were lifted, major cities in India are witnessing a huge demand for housing property with the sale of premium and luxury homes rising. Cyrus Modi, Founder and Managing Partner, Viceroy Properties Limited, says that due to the increase in employment, there has been an increase in the spending power and disposable income of the people. Recent trends have shown that due to rising standard of living and growing need for bigger homes, people today have a desire to live in bigger homes with better amenities that can complement the hybrid work culture.
Modi said that good demand is being seen in the Indian real estate market during the current calendar year. The recent festive season spending by people, along with the workforce returning to metro cities, has boosted demand and ensured steady sales for the first 10 months of 2022. Despite the geo-political issues, the real estate sector has been booming in the major cities of the country. RBI has increased the rates by 190 basis points since May 2022 and it is expected to increase further in the future. The increase in interest rates may put some pressure on the demand for property in the coming times. However, the impact of rising interest rates will be felt less in luxury than in affordable sectors.
These factors along with strong festive season sales have contributed to the pick up in demand for properties this year. During this time, some well-known banks cut interest rates and waived off processing fees to boost credit off-take amid festive season spending showing growth in the real estate sector in October 2022. However, the cheaper interest rates were offered for a limited period of time, and the sector may see further hike in interest rates as it is still in the rate hike cycle. Modi said that therefore my advice to investors would be to plan home loans carefully as home loan rates are likely to remain high for at least 4-5 quarters. In such cases, home buyers can opt for new launches instead of ready-to-move-in properties as they are less expensive.
Modi said that with the improvement in fiscal position, the Indian economy is likely to grow at 7% or more in FY23, and further predicted that luxury homes and high-quality real estate will continue to grow, irrespective of interest rates or price hikes. The demand for estate development will remain stable. Overall, from a longer term perspective, no pressure is expected on the demand or pricing front in the near future. Projects developed by reputed names will continue to see steady demand and growth in future.