Post the pandemic, housing prices in India are witnessing a recovery and there has been a 4.3 per cent rise in real estate prices for H1FY24 (April–September). An uptrend has also been noticed in housing sales and launches, price rise notwithstanding.

According to The Indian Economy: A Review carried out by Economic Affairs department, the average annual growth in real-estate prices has gone up from 2.3 per cent in FY22 to 3.8 per cent in FY23; and up to 4.3 per cent in H1 of FY24. “That there has been an uptrend in housing sales and launches despite an appreciation in real-estate prices and higher interest rates, attests to the strength of the recovery of incomes and optimism about the future,” the FinMin report mentions.

Bank credit for housing has also moved up to be 8.7 per cent of the GDP (annual estimate) for the first half of FY24. This is a substantial improvement over the 7.3 per cent of FY23. In the pre-Covid years, between FY12 and FY20, the bank credit as a percentage of GDP increased from 4.5 to 6.8.

In FY21, the Covid year, when interest rates were low, the bank credit to GDP ratio shot-up to 7.5 per cent and then in the following two fiscal moderation to 7.3 per cent and 7.4 per cent, as interest rates began moving up. Unsold inventory levels or inventory overhang is at 34 months in Q1FY24, the review mentions, as against 45–48 months for Q1FY22 and Q1FY23 periods.

Home Sales Up

As per consultancy firm Knight Frank, there was 3,30,000 home units sold across eight cities in calendar year 2023, indicating a 5 per cent y-o-y rise.

ANAROCK pegged home sales numbers at 4,76,530 units in the top 7 cities, up 31 per cent y-o-y (3,64,870 units). The available inventory, ANAROCK said, decreased by 5 per cent in 2023, over 2022, while residential prices collectively rose 15 per cent annually across these cities with Hyderabad witnessing the highest increase of 24 per cent annually.

PropEquity said, housing absorption in CY23 increased by 15-16 per cent to 5,10,000 units. “Despite price increases, the affordability ratio witnessed a marginal 100-200 basis point improvement in top 8 cities as income growth surpassed pricing growth and mortgage rates remained flat,” Motilal Oswal said in a report

Rising Household Investments

The Department of Economic Affairs Review of the Indian Economy said, rising household investment has also contributed to the recent strengthening of the investment rate in the real estate. A slight moderation in prices and wealth effec tfrom the accumulated financial assets of the households has imparted buoyancy to the real estate market, the report mentioned.

The household sector investment, which constitutes the largest share in the total Gross Fixed Capital Formation, was on a rising trajectory just before the pandemic. This was driven by a gradual decline in growth in real-estate prices and a continued increase in bank credit for housing. “After the pandemic, housing prices began to recover,” it said adding, “Multiple proxy indicators and industry reports point towards the emergence of green shoots of a private capex upcycle in the post-pandemic years.”

The Index of Industrial Production (IIP) data shows that the capital goods index and infrastructure and construction goods index saw a 12.9 per cent and 8.4 per cent, respectively, in FY23. The indices have carried forward their momentum thus far into FY24 and have grown by 7.5 per cent and 11.1 per cent, respectively, on a cumulative basis till November 2023. The recent results of listed and unlisted corporates also indicate expanding private investment in the first half of FY24.

As per Axis Bank Research, capital expenditure by Private Non-Financial Companies has grown by 28 per cent in FY22 (to ₹4.8 lakh cr), 23 per cent in FY23 (₹5.9 lakh cr) and 10 per cent in H1 of FY24 (₹3.4 lakh crore vs ₹3.1 lakh crore), the report adds.

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