India’s residential real estate sector has sustained its positive trajectory in the latter half of 2022. As per Housing Research, from July to December of 2022, there was a significant increase of 79% in new supply and a 32% rise in demand in comparison to the same period the previous year. This manifestation of pent-up demand was evident in the housing market, with a pickup in the volume of housing loans and sustained residential sales momentum. As a result, prices have stabilized, and the construction of new dwellings has gained momentum. In India, a high proportion of disposable income is dedicated to consumption, and the pandemic led to a suppression of consumption that created a greater rebound force post the second wave.
Additionally, the improved sentiments regarding the economic scenario for both current and future expectations amid stabilized inflationary pressure indicate an overall optimistic approach amongst homebuyers for the next six months as indicated by our latest consumer sentiment survey. While the economic outlook has improved marginally, consumers are optimistic about their future earnings.
To put things in perspective, tightening of global labor markets and spate of mass layoffs in tech are acting as bellwether for consumer sentiments across countries. Although it is to be noted here that many of these organizations had significantly increased their headcount post COVID-19 buoyed by the record high revenues. In case of India, the unemployment rate in urban areas spiked to the highest (10.09 per cent) since the first wave of pandemic in December 2022. However, it has since cooled off and is currently pegged at 8.55 per cent.
The services PMI is also at a 6-month high on the back of a quicker upturn in new business indicating improving services activity. In line with this, 64 per cent of the consumers opined that they are confident about their income for the coming six months. Although sequentially the sentiments have dropped marginally as compared to the July-December 2022 period. However, the increase in tax rebate for personal income as per the recently announce Union Budget, will leave more disposable income in the hands of individuals to invest in homes.
In a nutshell, the optimism of homebuyers regarding their income is a significant driving force in the real estate market. As also suggested from the homebuyer survey, budget forms the most vital aspect while closing in on a purchase. Hence, when homebuyers have a positive outlook on their income, it instills a sense of financial security and confidence in their ability to afford a new home. This positivity opens doors to favorable loan terms, higher purchasing power, and long-term investments, especially in the current scenario where property prices are rising at the fastest pace of 6-7 per cent coupled with a cumulative repo rate hike to 6.50 per cent from the all-time low of 4.0 per cent during the pandemic. Having said that, there is still a need for market stimuli such as discounts and tax waivers to push fence-sitters closer to purchase.
