Festive seasonal sales to slow down the real estate market

Home sales have been strong all year due to low interest rates and pent-up demand from the days of the pandemic. While home loan rates are about 7.9 percent today, having stayed at about 6.6 percent for the past two years, demand remains on strong foundations.

This trend is expected to gain momentum during the upcoming holiday season, when buyers tend to invest in real estate, as this is considered a favorable time for home buying. If we look at it, the rate hike on home loans hasn’t really dampened demand as interest rates are still below pre-pandemic levels.

The 2022 Housing Price Tracker Report, released by the Confederation of Real Estate Developers Association of India (CREDAI) and real estate consultants Colliers India and Liases Foras, shows demand for housing has increased in eight cities including the Mumbai Metropolitan region (MMR), Delhi-NCR, Chennai, Kolkata, Bengaluru, Hyderabad, Pune and Ahmedabad.

Buyers know that home prices are rising and they want to close a home before prices escalate. In recent months, real estate developers have increased property prices due to the high cost of raw materials such as cement and steel. According to the 2022 Housing Price Tracker Report, property prices have increased by 5 percent in the Delhi-National Capital Region, Mumbai Metropolitan Area, Kolkata, Pune, Hyderabad, Chennai, Bengaluru and Ahmedabad. The highest price increase was recorded in Delhi-NCR at 10 percent year-on-year, followed by Ahmedabad and Hyderabad at 9 and 8 percent respectively.

Also Read: The Best Financial Lessons You Can Learn from the Pandemic

The desire to buy a home before prices escalate is likely to spark a lot of interest in residential real estate this holiday season. In anticipation of high demand, real estate developers are launching many new projects with new features. Developers also offer freebies and other incentives to attract buyers. While holiday incentives are almost a staple every year, this time around they could be key to ensuring the continued growth momentum in sales continues over the next few quarters.

Many builders offer discounts on real estate prices and innovative payment systems to attract homebuyers. Developers offer freebies such as personal closets in all bedrooms, a modular kitchen with a fireplace, etc. There are some that offer schemes where developers pay rent to buyers until they own their home. This is intended to entice homebuyers to buy properties under construction. Buyers have shown a clear preference for move-in-ready homes because it saves them money on house rent while paying EMIs on home loans. Developers believe incentives like offering to pay rent will motivate buyers to invest in homes under construction.

Developers are bullish on the selling because they believe the selling momentum is based on strong fundamentals such as: B. the demand from end-user buyers and not from speculators. Sales in the first half of 2022 (January-June) were the highest in over a decade, surpassing only the first half of 2010. This is due to a rising preference for home ownership among millennials. Millennials make up a large percentage of first-time home buyers as they settle down and start families. The Covid pandemic has been a wake-up call for many, including millennials, looking for a sense of permanence. Nothing offers more security and stability than your own home. This is supported by the fact that disposable incomes are increasing, which is driving demand for homes. Tier 2 cities like Ahmedabad, Vadodara, Nashik, Gandhi Nagar and Jaipur, where millennials are home buying, are expected to see good sales.

The desire for larger and more spacious apartments is also growing in view of the home office or hybrid working model. In recent months, there has been a sharp increase in demand for large apartments with their own office space, additional rooms, balconies, gym and modern gadgets and devices. This trend is expected to continue for the rest of the year. A report by Knight Frank shows that 60 per cent of all house registrations in Mumbai in August 2022 were in the price range of over Rs 1 crore. Home buyers increasingly prefer larger apartments between 500 and 1000 m².

Demand for luxury and luxury real estate is also strong, particularly from the NRI community. A weaker rupee has boosted the purchasing power of NRIs, which have shown interest in buying luxury properties in the cities they originally belong to. NRIs have also shown a preference for planned developments, leading many developers to enter this space.

There is a wide range of houses on offer this festive season. The developers are optimistic that with the strong desire to own a home and attractive offers and freebies, the home ownership reception will be good. Expectations are high that the holiday season will boost home sales and sales will see a huge surge after the holiday season.

(By Shiwang Suraj, Founder & Director, InfraMantra)

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