New Delhi, Dec 30 (PTI) New home sales in India declined for the first time since the pandemic, as a sharp rise in housing prices and elevated borrowing costs ruined buyers’ appetite in 2024 and the real estate industry is now eyeing the upcoming Budget for favourable economic conditions — a key to reviving demand conditions.
The de-growth in the Indian housing market came after three straight years of stellar growth, following the COVID-era downturn, and was attributed in part to a high base in the previous year, a fall in supply of new homes and price appreciation.
Anuj Puri, Chairman of Anarock, one of the leading housing brokerage firms in the country, termed the year 2024 as a “mixed bag” for the Indian residential market and noted that, while demand for the affordable housing segment was weak, sales and launches of luxury homes remained strong.
India’s residential real estate market, estimated to be valued at over USD 300 billion, faced a marginal 4 per cent drop in sales volumes during 2024, according to data from consultant Anarock. After a 47 per cent decline in 2020, housing sales had grown by 71 per cent, 54 per cent and 31 per cent in 2021, 2022 and 2023, respectively.
Post-pandemic, the ultra-rich started lapping up luxurious flats, villas and penthouses at launch itself and this year was no different.
“No doubt, the central and state elections played spoilsport to some extent, but it would also be fair to attribute at least some of the decline to the high base considering that in 2023 both new launches and sales had attained all-time high peaks,” Puri said.
Going forward, he expects the housing market to stabilize in 2025, with muted growth in prices, as against an average 21 per cent year-on-year rise this year. “Much also depends on what the upcoming Union Budget holds in store,” Puri said.
Real estate developers have a long-standing demand for an increase in the deduction limit of interest on home loans under the Income Tax Act to boost housing sales, particularly in affordable and mid-income categories.
The luxury and ultra-luxury housing segment, which does not need any fiscal support, continued its upward journey.
Most of the real estate companies focused on luxury residential projects led by realty major DLF Ltd that launched a super luxury project ‘The Dahlias’ in Gurugram comprising around 400 units with an estimated sales value of Rs 26,000 crore — possibly the largest project announced so far in terms of revenue potential.
News of luxury residential projects getting sold within a few days of their launches became the new normal in 2024.
“2024 has been another monumental year for the Indian real estate sector, with residential demand still remaining robust on the back of heightened consumer interest and the shift towards buying instead of renting,” CREDAI National President Boman Irani told PTI.
The luxury segment has done particularly well, providing further validation of the evolving appetite of the Indian homebuyers who now seek better, bigger homes with enhanced lifestyles, he added.
In contrast to the housing segment, the office market saw record leasing of workspaces this year, with foreign companies looking to set up Global Capability Centres (GCCs) in India to capitalize on the availability of cheaper real estate and English-speaking skilled talent pool.
Gross leasing of office space across eight major cities is estimated to rise 14 per cent to touch a record 85 million square feet in 2023, according to Cushman & Wakefield data.
The demand for managed office space gained further momentum, prompting coworking operators to expand their portfolios in a big way.
To fund their expansion plan, coworking operators Awfis successfully launched its Initial Public Offering (IPO) this year, while Smartworks and IndiQube Spaces have filed preliminary papers with market regulator Sebi to launch their public issues.
The office market also got a filip from SEBI, which earlier this year approved regulation for Small and Medium Real Estate Investment Trusts (SM-RRITs) to boost investments in rent-yielding commercial properties. It is similar to REIT but as the name suggests smaller in scale.
Property Share Investment Trust launched India’s first SM-REIT public issue this year and there are many IPOs lined up for the next year in this space.
With a surge in e-commerce business and the government’s focus on boosting manufacturing activities in India, the demand for industrial and logistics spaces remained high this year.
Premium shopping malls continue to do good business helped by entertainment and food & beverages segments, encouraging builders to expand their retail real estate portfolio.
Being bullish on the long-term growth prospects of the sector, foreign and domestic investors infused huge capital in housing, office and industrial-logistics properties hoping for a better return on investment.
JLL India reported that Indian real estate attracted 51 per cent higher institutional investment in 2024 to nearly USD 9 billion, and experts believe that the trend will continue in the New Year on sustained demand across all asset classes.
Moreover, consolidation in the real estate sector gained further momentum this year, with consumer demand continuously shifting towards reputed players having better track records of executing projects.
To cater to this shift in demand, big and branded real estate players were very aggressive in land acquisition through outright purchases as well as entering into joint ventures with landowners.
There were also some positive developments this year on the old stalled housing projects front.
Mumbai-based realty firm Suraksha Group got a green signal from the National Company Appellate Tribunal (NCLAT) to acquire Jaypee Infratech Ltd through an insolvency process and complete around 20,000 units.
At the fag end of the year, the National Company Law Tribunal (NCLT) allowed state-owned NBCC to complete 16 real estate projects of Supertech Ltd. NBCC is already completing the stalled projects of erstwhile bankrupt Amrapali Group on the direction of the Supreme Court.
The successful resolution of these stuck projects holds the key to regaining consumer trust in India’s property market, even as homebuyers stuck in stalled projects of Unitech Ltd did not get any solution even this year.
In a nutshell, Indian real estate was more or less able to sustain demand in the housing segment, while achieving growth in office and warehousing verticals.
Real estate experts are confident about better performance of the housing segment next year, provided prices remain under control.
The sector can grow faster if the RBI cuts interest rates in its monetary policy and the Centre announces tax incentives for individuals and developers in the upcoming central Budget, industry players believe.
Irani of CREDAI feels that the real estate sector still faces “policy-related roadblocks that hinder its full potential”.
“Going into 2025, we are optimistic of government interventions to streamline certain policy roadblocks, especially for the affordable housing segment, to improve feasibility and address affordability concerns,” he said.
Irani stressed the need to redefine affordable housing, expand 80C benefits, and reduce interest rates to propel growth in Indian real estate, whose market size — as per Naredco-Knight Frank report — stood at nearly USD 500 billion in 2022 and is estimated to reach USD 5.8 trillion by 2047. PTI MJH ANZ DRR BAL
About the Author
