Experts see 2023 as a year of smooth sailing for real estate sector

Demand likely to remain buoyant despite prospects of another rate hike; industry looking for tax breaks, lower transaction costs

After a two year pandemic-induced slowdown in the real estate industry, year 2022 offered a ray of hope and saw most of the industry segments recovering from the Covid lows, record significant year-on-year growth. This growth trend is expected to continue in the calendar year 2023, say industry experts.

In the past, factors such as inflation, rising mortgage rates, and a short supply of buildings had a negative impact on the housing market. However, the sector is estimated to have recovered significantly. In the post-pandemic era, residential sales have already risen by 51 per cent, said Rajan Bandelkar, President, Naredco.

Pandemic-induced trends such as remote and hybrid working prompted homebuyers to look for larger, sustainable spaces with value-added services and amenities that would enhance their well-being.

"The pandemic also brought forth real estate as a more stable investment option, and this sentiment was further strengthened by the industry's performance over the year," said Vimalendra Singh, Chief Sales and Service Officer, Mahindra Lifespaces.

The demand and supply dynamics are expected to remain resilient in 2023. Despite the likelihood of another round of rate hikes, the market is expected to respond positively as it has done in the current year, Singh added.

Commenting on the industry's performance in 2022, Navin Makhija, MD, Wadhwa Group, said demand was robust in the past few quarters due to improved consumer sentiment. The industry expects the government to announce incentives such as tax breaks to help increase public spending, and lowering of transaction costs, in order to propel the sector's growth.

Developers should focus on completing existing projects. Sales will happen when the buyer sees a project reaching completion stage as this will sustain the demand for good developers and for ready-to-move-in inventory, Makhija added.

Signature Global chairman Pradeep Aggarwal also dwelt on government initiatives such as SWAMIH, which helped fund stalled affordable housing projects and said such a move would further encourage affordable housing players to expand the segment in the year ahead.

Affordable housing finance will grow the fastest, with mortgage penetration expected to double to 8-10 per cent over the next few years, Aggarwal added.

All segments of real estate--housing, office, retail, warehousing, data centres, co-working and co-living-- performed well. Housing sales are set to breach pre-Covid levels and may hit an all-time high, said Dhruv Agarwala, Group CEO, Housing.com, Proptiger.com, and Makaan.com.

He added that 2022 was a good year for the entire real estate sector after a long gap, looking past the disruptions in the past 5-6 years caused by demonetisation, the introduction of RERA & GST, the NBFC crisis and of course, the Covid-19 pandemic.

The commercial segment is expected to record substantial year-on-year growth in leasing in 2022, despite strong headwinds emerging from geopolitical challenges. According to Knight Frank, the next year is expected to see further growth in office space transactions as more corporations ask their staff to return to office and expand hiring activity.

“Year 2022 saw the resurrection of the residential market. The trend of preference for residential ownership, which started about 18 months ago, continued throughout the year despite the rise of home loan rates by 225 BPS,” said Shishir Baijal, chairman and managing director, Knight Frank India.

Baijal sees this as a sign of the strength in the market and expects this trend to continue next year, with demand rising for both affordable and more expensive housing.

However, Anarock's consumer sentiment survey for 2023 indicates that if home loan interest rates rise above the 9.5 per cent mark, the industry can expect a significant contraction in housing demand.

"Housing sales remained upbeat throughout 2022, and the current sales momentum will sustain at least into the first quarter of 2023. Thereafter, much will depend on forces other than the desire for home ownership, such as additional repo rate hikes and property price increases. Year 2022 saw the repo rate go up by almost 225 bps, and home loan interest rates lost no time in going up concurrently," said Anuj Puri, Chairman, Anarock.

The realty sector has grown rapidly in recent years, and the trend is likely to continue in the years ahead, Puri added.

"The Indian real estate market is predicted to reach Rs 13 trillion by 2023 and touch $1 trillion in value by 2030, generating a large number of employment opportunities," said Kamal Khetan, Chairman & Managing Director, Sunteck Realty.

The housing market, which propels and supports the real estate industry as a whole, is poised to boom, Khetan added.

"With the growth of the digital economy aiding the rise of e-commerce, we can hope to see a greater rise in demand for warehousing spaces, both in the top metropolitan cities and in tier-2 and 3 markets. The new year may also see nascent trends like near and in-city warehousing attain importance," Baijal added.

Industry experts say while 2023 may have its own challenges with geopolitics impacting India’s real estate segment, some positive signs are also emerging in the anvil. There are signs that the Eastern European war may end soon, inflation may start receding globally by mid-2023, and oil prices may also stabilise. The expansion of the real estate market will be influenced by the efforts and policies announced by the government in the upcoming union budget and overall economic situation.