Festive Exuberance – Hyped or Real?

As the festive season rolls on a positive note, robust home sales are quite encouraging. According to an Anarock report, housing sales have witnessed 45% YoY rise in the September quarter. Affordable housing, which has been a major growth driver , has seen robust demand in this segment. Almost 70% of all homes sold fall in the affordable and mid-priced category . But what is special this festive season is that there is a double engine boost to home sales, with the share of luxury homes in overall homesales doubling to touch  almost 20%  mark. The luxury market of Mumbai has seen an 11% rise in property registrations in the month of September.  

A high offtake of home loans is supporting the home sales. The home loan books of India’s largest public sector and private sector mortgage players- State Bank of India and HDFC bear testimony to it. SBI’s home loan book  has achieved a milestone of Rs 6 lakh crore On the other hand HDFC’s assets under management have touched Rs 6.7lakh crore.The special discounted home loan rates offered by both the lenders for the festive season are driving home sales.  

Despite all global headwinds, the Indian economy has shown great resilience and continues to be the fastest growing economy with its GDP growth for FY 23 pegged at 6.5-7%. IMF Managing Director Kristalina Georgieva has dubbed the Indian economy as a bright spot.  Amidst increasing inflation and rising interest rates, residential realty has stood its ground due to rising income and employment. Monster India has forecasted 20-30% increase in hiring activity in FY 23. The Teamlease Employment Outlook   Report puts hiring plans of India Inc at a 2 year hgh. Recruitment agency Michael Page India has predicted salary hikes to exceed pre-covid levels this year. All this bodes well for the residential realty.  

But then there are worrying factors as well. Currently, the economy is facing double whammy with retail inflation at 5 month high at 7.4% and IIP contracting to 0.8%. In this backdrop, RBI may well further increase  the interest rates in December by 35-50 bps.This will further increase the EMI load and even stretch home loan tenures. Home affordability has  already gone down by 2% across cities since the rate cycle started upward movement in May this year. Any more interest rate hike will further worsen affordability, adversely impacting home sales. 

But despite these challenges, economic experts believe that the economy and employment will continue to support real estate amidst higher spend on infrastructure . SBI Chairman, Dinesh Khanna is of the opinion that the Indian economy which is much better than other global economies may do further well. Higher PE investments in real estate, rising by 40% in September quarter to USD 2.8 billion hold hope for real estate(including residential) growth  particularly as freign investors including NRIs are taking full advantage of the rupee depreciation.