India’s residential market is witnessing a phenomenon where the rise in price of houses could possibly crowd out end users or real buyers, with investors coming in and making a larger play. Sequential slowdown in sales is already visible because of price rise putting houses out of reach of buyers.
Select micro-markets like Gurgaon and Noida are amongst those witnessing nearly 20 per cent y-o-y price hike. while there is a visible slowdown in launches and subsequent frenzy surrounding bookings during these launches.
“There are markets, where we have seen prices go up by more than 20 per cent. I would say Gurgaon, Noida, and lots of markets (are witnessing) over 20 per cent price rise, which I think is obviously going to crowd out end users,” Dhruv Agarwala, Group CEO, Housing.com and PropTiger.com, told businessline.
House prices across key markets are up 3 - 49 per cent on a y-o-y basis. For instance, Delhi – NCR region combined saw a 49 per cent price rise, the highest, while Hyderabad saw a 3 per cent rise.
According to him, as prices “keep going up”, it is a natural tendency for speculators and investors to come in. “You are hoping that you get a good ROI on that (the investment made) and that ultimately makes it prohibitively expensive for actual users,” Agarwala said adding, “If prices keep going up (further), we’ll soon reach a situation where it will become next to impossible for end users to buy.”
Sequential slowdown in sales
In fact, housing sales have displayed mixed trends across cities in the first half of 2024. Sequential slowdown was observed.
Data from Anarock Property Research shows that after growing at a fast clip for the past two-and-a-half years, the country’s housing market has begun to show signs of fatigue among homebuyers, and sales of new homes have declined for the first time in the April-June quarter.
Anarock’s sales data for the June quarter (Q2CY2024) show an 8 per cent sequential decrease. As many as 1,20,340 units were sold in April – June, as against 1,30,340 units in January - March. Decline in sales was reported across key markets like Hyderabad, Kolkata, Bengaluru, Chennai, Pune and Mumbai.
Housing.com data shows a 6 per cent sequential decline in sales from 1,20,642 unit in Q1 to 1,13,768 unitsacross key markets - Ahmedabad, Chennai, Hyderabad, Kolkata, Pune and Mumbai; with the exception of Bengaluru and Delhi – NCR region.
“In the more recent couple of quarters, we have also begun to see that (the) frenzy has almost vanished wherein, we saw (a) new project getting launched and sold in a few hours in Gurgaon. So, I think that’s good for the market. It’s never good for craziness to remain in the market. So, hopefully with demand getting a little bit more tempered now, it will also keep prices stable,” Agarwala pointed out.
Luxury home sales have bucked the trend though, with houses priced above one crore rupees accounting for nearly 40 per cent of the total home sales in last quarter.
Aakash Ohri, Jt Managing Director and Chief Business Officer, DLF Homes, said, Delhi NCR, particularly Gurugram, has become a focal point for real estate investment, with record-breaking demand for newly-launched projects. Influx of NRIs and HNIs investing in the region is further bolstered by favourable currency exchange rates and simplified investment processes. “We anticipate continued growth, with ongoing infrastructural advancements and increasing capital appreciation,” he said.
Moderation in launches
Launches have become more realistic in terms of supply. And a moderation is witnessed in select markets.
Data from ‘Housing.com’ shows a 1 per cent moderation in launches sequentially. New launches were around 1,01,677 units in April – June period, as against 1,03,020 units in the January – March period. Hyderabad and Kolkata saw the highest sequential decline of 58 and 49 per cent, respectively, to 6,365 and 753 units. Chennai saw a decline of 2 per cent to 4,633 units, while Pune saw a decline of 11 per cent to 22,314 units.
However, Ahmedabad market was an outlier witnessing a 110 per cent rise to 6,533 units, followed by Delhi – NCR region, up 17 per cent, Bengaluru up 26 per cent to 12,564, and Mumbai up 10 per cent to 22,314 units.
Agarwala highlighted, “We’re observing a shift in the dynamics around new launches. The initial frenzy and excitement that typically surround a launch have noticeably been subdued in recent launches. These are early signs of a slowdown in the market, which is also reflected in a quarter-on-quarter decline in sales numbers. These transitions aren’t immediate; they unfold over time and hence we need to keep a close eye on new launches and sales to see where the market is heading.”