The Nifty Realty Index zoomed over 3 per cent as the Reserve Bank of India decided to maintain the status quo and kept the key repo rate steady at 6.5 per cent. Going into the festival season, with developers ready with many launches, this would be good news for a sector anxious to maintain the demand momentum.
Barring a few, most real estate stocks were up today in the range of 0.8 to 4.7 per cent, led by market leaders such as Godrej Properties, DLF, Macrotech Developers, and Ajmera Realty, which gained over 4 per cent.
Almost all the commentary from real estate developers and analysts was around the forthcoming festival season and ‘sentiments’ not getting affected.
“The synergy between steady interest rates and the ongoing festive season sentiment will lead to sales clearly outpacing last year’s numbers to a new high,” said Samantak Das, Chief Economist at JLL India.
Data from most property consultants show that home sales in the first nine months of 2023 are running just slightly ahead of the numbers in 2022. The demand in the first three quarters has crossed 75 per cent of last year’s total, and with the festival demand yet to come in, expectations are rife that this year, the industry will be able to easily overhaul last year’s total.
While sales in the second quarter of 2023 lagged that of last year, the third quarter sales were better than a year ago and were the highest in six years. Knight Frank data shows that in 2022, residential sales were above 3.1 lakh units in the top eight cities in the country.
Rising interest rates have dampened affordability and demand in the affordable segment with ticket sizes of less than Rs 50 lakhs. Home loans have become costlier, with banks’ base lending rate up 155 basis points since May 2022, which was the month when the rate hike cycle started. Knight Frank’s calculations show that the impact of the rate hikes has been a 7 per cent increase in down payments and a 14 per cent rise in monthly instalments. The slowdown in the US and Europe has affected the IT sector in India, and job losses and layoffs have hit the sector, a reason why Bengaluru and Hyderabad have seen the most fall in sales in the affordable category.
Demand is, however, robust in the mid-income and premium segments, with the luxury segment showing the most buoyancy. . Consequently, supply dynamics have also shifted, with real estate developers constructing higher-priced residences.
September quarter numbers show that the supply of homes in the mid-income segment has gone up by 30 per cent annually while that in the premium segment has risen 37 per cent. The supply of affordable homes has dipped 6 per cent.
“The unchanged repo rate is a festive bonanza for homebuyers and gives them yet another opportunity to make cost-optimized home purchases,” said Anuj Puri, Chairman, ANAROCK Group. “We are entering the festive quarter with a very strong momentum in housing sales, and unchanged interest rates will act as a major catalyst for growth in the residential market,” he added.