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Will the Current Boom in Real Estate Continue in 2022?

By February 1, 2022July 6th, 2022Blog7 min read
Real Estate in 2022

The market for housing stands restructured post the COVID-19 scenario. There has been a remarkable change in the mindset of people and a craze to own a piece of residential real estate, at least in the urban locality.

Several elements are known to drive this dynamic trend. During the first stage of the pandemic, we noticed a powerful wealth erosion across other asset classes, such as essential metals, equities, mutual funds, and LIC’s. Only the real estate sector was powerful enough to weather the storm. Many individuals who rented apartments were treated differently by the lodging societies and struggled during the pandemic, and this was furthermore instrumental in encouraging the need to own a home.

A compilation of these factors has initiated the growing demand for residential real estate, as evident from the movements across the major cities. While the second quarter of 2020 was a complete washout as the architects and customers were unaware of how to deal with the situation, the residential real estate market developed ways and means to stay clear of the problem and pave the path for a new growth trajectory.

Exemplary Revival

It is fascinating to witness that since the second quarter of 2020, almost 2.90 lakh units have been established throughout the seven major cities in the nation, and they recorded real estate deals in approximately 2.83 lakh branches. This shows a constant demand for accommodation, despite the two killer waves of COVID-19 that swept across the nation. Post the first wave, the real estate sales and takeoffs have been on a steady rise with a brief pause in the second quarter 2 of 2021, owing to the second wave of the pandemic. The resurrection graph in the third quarter of 2021 was upright, with the sales volumes across each city almost doubling compared to the previous quarter.

Despite increasing sales and launches, the available inventory has grown marginally by 3% every year at 6.55 lakh projects as of the third quarter of 2021. Even though the highs and lows, the presently available real estate inventory levels align with the third quarter of 2019.

Nevertheless, housing real estate prices have been growing slowly and steadily. While the market has gained momentum, the architects have been careful to keep the expenditures in control. They are more focused on providing the buildings continuity and liquidating the available inventory.

The growing prices of steel, cement, and raw materials have constantly pressured the developers. As of now, the prices relished modestly by 4% yearly in the third quarter of 2021 as the architects are conscious that plunging price hikes will disturb the demand cycle.

The mega real estate projects across the country and within the cities have been important in realising the real estate potential of many small regions. Extensive projects such as DMIC, Bharatmala Pariyojna, Industrial Parks and Corridors, and several expressways being directed, along with new roads, ports, and flyovers, have been critical in creating new real estate markets across investment classes. Therefore, industrial, warehousing, and logistics are industries that will witness growth along with these projects and eventually catalyse the need for more residential real estate.

Urban Demand

Within the major urban cities, there is a definite rise in housing demand in the smaller locations as their connectivity has been enhanced significantly with the city centres and financial hubs. The metro rail web across the major municipalities is experiencing expansion and has further enabled improvement of the connectivity to the smaller markets. This has given birth to a rising need for housing in these recently evolved landscapes, evident from the growing share of residential projects. As of the third quarter of 2021, almost 68% of the total takeoffs were in the smaller regions, which is expected to rise significantly.

Meanwhile, the urban markets, including the Mumbai Metropolitan Region (MMR) and Pune, have had the most increased share of the real estate demand in the last three years in terms of takeoffs and revenue. The broad economic base and the presence of numerous extensive and detailed developers in these municipalities, along with Maharashtra being the first state to execute the Real Estate Regulatory Authority (RERA) successfully, have made the customers confident. Last year, the government’s initiative to reduce stamp duty had also helped better the lodging demand. The result of these policy changes is still evident from the resumed momentum of accommodation sales even after the departure of the benefits seen months ago.

The western zone accounted for 46% of the takeoffs and 48% of the deals across the top tier cities of India through the years 2019 to 2021. The architects are precisely investing in supply to keep the demand-supply equation stable. The share of new start-ups in the west zone has decreased from 52% in 2019 to 41% in 2021. However, encouraged by the government’s motivations and low prevailing mortgage rates across the nation, the sales share has increased from 47% to 50% during the same period.

The south zone, including Bengaluru, Chennai, and Hyderabad, is the most dynamic market. These cities combined held 36% of the takeoffs and 30% of all the deals between 2019 and the third quarter of 2021. While the percentage of sales has stayed stable at 30% throughout these years, the share of start-ups has grown significantly from 29% in the year 2019 to 42% in the third quarter of 2021. This peak in the percentage of new launches is primarily due to the improved supply in Hyderabad, especially in the last two quarters, as multiple projects were granted approvals.

The percentage of real estate sales and project launches in the north has declined potentially during this time. The National Capital Region (NCR) accounts for nearly 14% of the launches and 17% of total revenue. NCR documented 15% of the start-ups in 2019, which has declined to 12% in 2021. Real-estate sales have also reduced from 18% to 15% during the same period. As numerous extensive and listed architects make a run for the NCR, the condition is likely to alter in the future.

Real-Estate Sales In Focus

The residential real estate demand is going to develop in the future years. 2019 saw a steady rise for the residential segment post the conditions created in the year 2015-16. Nevertheless, the COVID-19 plague temporarily halted real estate development in 2020. The sharp V-shaped comeback that has followed clarifies that the development trajectory will persist into 2022 and beyond. However, there may be some deceleration if the interest rates grow. The prices are likely to develop in the future, but the growth will be more reasonable.

The development of residential real estate across the country is now confirmed as a robust market, with changing demographics, and the realisation of the need to own a demanding asset. Therefore, prices can grow dynamically as the market rises and the financial situation is enhanced.

RNC is a well-known and respected name in providing techno-commercial services such as Valuation consulting & allied services, Insurance Survey & Loss Assessment and Insurance Advisory services and Corporate Finance & Deal Advisory.

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