India’s residential real estate sector has sustained an upward trajectory in the Q1 2023. Having said that, as per Housing Research, while the new supply grew by 86 per cent in March quarter, the sales grew at a slower rate of 22 per cent during the same period. The decelerated pace of sales can be attributed to various factors, with one of the primary causes being the absence of suitable offerings in the market. According to our analysis of consumer behavior and market trends, prospective homebuyers are facing difficulties in finding properties that meet their requirements in terms of both budget and location.
If we dwell deeper we can see that, budget has been ranked as the top key consideration while purchasing the home. Buying a home is a capital-intensive process and has several costs associated to it such as down payment, maintenance charges, property tax amongst others which have to be considered while buying the property. Hence purchasing a home generally forms one of the biggest expenses for the household making budget the top consideration.
Following the budget, location has taken the second spot amongst the key considerations while buying a home. Location is an important consideration when making a purchase as it has impact on the value of property. Moreover, proximity to social infrastructure such schools and hospitals, retail areas, commercial areas, transportation hubs can greatly impact the livability of the property. It also affects the resale value of the home. Developer credibility took third spot on the list as it provides cushion against the downside of the trust deficit previously created due to defaulting developers and stalled projects witnessed in various projects across the country.
Hence, while the pandemic has fueled the sentiment of homeownership owing to the need for safety and security, budget is still the most important factor which drives the buyers closer to purchase. However, in the past two years property prices have grown at the fastest pace of 6-7 per cent as compared to the previous 2-3 per cent. To add to this, 61 per cent of the potential homebuyers are looking for ready-to-move-in properties, although only 18 per cent of the available 9.11 lakh available residential units fall in this category. The demand-supply gap has led to developers charging a premium over such properties. Additionally, the cumulative hike in repo rate of 6.50 per cent from the all-time low of 4.0 per cent during the pandemic as pushed the home loan interest rates which have a significant impact on the budget of potential homebuyers.
In a nutshell, the deep down in demand and supply trend and homebuyer preferences suggests that there is a need for market stimuli such as discounts and schemes, tax waivers, and paced completion of under-construction projects to push the fence-sitters closer to purchase and sustain the demand momentum.
Renuka Kulkarni, a seasoned real estate professional, brings over five years of diverse experience in research, consulting, and architectural design within the urban sector. Her expertise spans public and private projects, showcasing proficiency in real estate research, trend interpretation, and policy analysis. With qualifications in architecture and a master’s degree in Data Science (Business Intelligence & Data Analytics) from IIIT Bengaluru, along with an M. Tech in Urban Development and Management from TERI School of Advanced Studies, New Delhi, Renuka seamlessly blends data analytics with market insights, offering a holistic understanding of the industry in her research pieces.
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