India’s residential real estate market experienced a robust double-digit growth in both new supply and demand throughout 2023, propelling these metrics closer to the high levels observed during the 2010s. This surge was driven by the transition of organizations in top cities to hybrid and full-time work models, which played a pivotal role in increasing the demand for homes across the top eight cities. This trend was further reflected in high occupancy rates and office leasing activities surpassing pre-pandemic levels.
The growing interest among end users in homeownership resulted in property sales growing by an impressive 33 per cent year-on-year (YoY) in 2023, outpacing the 18 per cent growth in new supply during the same period. The primary markets witnessed a surge in property sales, buoyed by upbeat homebuyer sentiments fueled by economic growth and confidence in future earnings. The pause in the repo rate helped keep interest rates in check, further contributing to the momentum.
Specific homebuyer preferences have significantly influenced the demand in 2023, with gated communities and larger configurations such as 3 BHK properties being the top choices. Ready properties continued to be most sought after, although under-construction inventory of quality projects also witnessed robust sales velocity. Branded developers offering credibility to the buyer captured a significant share of overall sales in 2023.
Property prices continued to rise, registering a healthy 15–20 per cent yearly growth in key micro markets, especially those contiguous to commercial hubs in cities like Gurugram, Bengaluru, and Hyderabad. This uptick was driven by rising input costs, strong sales, and premiums charged on ready properties. Investor interest surged back into the market after a lackluster decade of sluggish growth, further boosting demand and property prices.
The growth in property markets also spilled over to Tier-2 cities, with high-intent online buyer search activity trending at par with top cities. However, the demand-supply dynamics witnessed in 2023 left some end-users outpriced, leading them to turn to rental markets. This surge in demand for rental properties catalyzed a substantial growth of 25–50 per cent in monthly rents in key areas compared to the pre-pandemic period.
Overall, the rally in residential realty in 2023 and strong consumer demand indicate that the property markets across the top cities will continue on an upward trajectory in the coming year. The IRIS index, which gauges homebuying demand in key cities, is 80 per cent closer to the historic peak, indicating intensified search activity likely to culminate into purchases in the next three to six months. The growth in institutional investments and enhanced stakeholder confidence will continue to form strong basics for the property market in the new year.
However, amidst geopolitical uncertainties and the resurgence of new COVID-19 variants, there are impending risks to consider. Additionally, 2024 being an election year for India will have a significant impact on homebuyer sentiments. Nevertheless, the positive trajectory of residential markets in the bygone year lends optimism to the outlook for 2024.
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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