Home sales growth or decline? Property market split over demand

Real estate experts disagree about residential sales this year: some expect a multi-year high in the first half and others a decline.

Residential sales hit a nine-year high in the first half of this calendar year (CY), said UK-based property consultant Knight Frank in a report recently. Experts at Anarock Property Consultants, which is based in Mumbai, said such sales have tapered off in recent months.

According to Knight Frank, eight cities saw an annual growth of 60 per cent in the first half of CY2022 at 158,705 housing units compared to 99,416 units in the first half of 2021.

On a quarterly basis, both sales and launches dipped in the second (April-June) quarter of CY2022 over Q1 of CY22, said Prashanth Thakur, head of research at Anarock Property Consultants.

Sales and launches decreased by 15 per cent and 8 per cent in Q2 on a quarterly basis. "After two strong quarters, there has been a drop in sales. People have gone for vacations after two years of pandemic. Home loan rates have also gone up," Thakur said.

Some launches are on hold due to raw material prices increasing. The years 2022 and 2013 are not an "apple to apple" comparison as the real estate sector slowed down in between, Thakur said.

Investors, too, differ on this subject. Amit Goenka, chief executive and managing director of Mumbai-based property fund manager Nisus Finance, said sales slowed down after March due to rate hikes by the Reserve Bank of India, the war in Ukraine and other reasonss.

"In May and June, home sales were slow as high-value deals were down in March. Since April, enquiries and conversions have been down due to an increase in interest rates, holiday season, inflation, and end of tax rebates, Goenka said.

Home sales could be at a nine-year high in value terms but not by volume, said Goenka, adding that in FY23 developers could see a 17 per cent year-on-year (YoY) drop in residential sales (both in units and volumes).

Sharad Mittal, chief executive of Motilal Oswal Real Estate, attributed the dip in sales in the June quarter to high commodity prices forcing developers to increase property prices and Maharashtra increasing stamp duty by one per cent. Mumbai is India's largest property market by value.

July-September is usually slow for new launches and sales due to monsoon rains. "With mortgage rates set to go further north, one can expect a temporary dip in sales as prospective buyers postpone their buying decision," said Mittal.

"Since the industry has not seen a surge in capital value in recent times, the sudden uptick in pricing coupled with increasing mortgage rates could impact these decisions in the short term. However, we expect that the upcoming launch season and festive sops would be a key driver for the sales momentum to continue, he said.

Sunil Rohokale, managing director and CEO at ASK Group, said home sales are robust. "The impact of interest rates and inflationary price hike has not reduced the home sales enquiries yet. Second half of the (calendar) year will provide a clear picture of the impact on home sales due increase in home loan rates and melt down in commodity prices," he said.

Developers too said sales are robust in property markets across the country.

Said Pavitra Shankar, executive director, Brigade Enterprises, "The demand in the (real estate) sector is now primarily driven by a desire to own property vs renting a home. Higher disposable income along with historically lower interest rates have also added impetus to the sector. Higher interest rates may affect the type of inventory purchased but we do not expect it to reduce the demand for housing."

Aparna Chaughule, associate director at India Ratings and Research, said strong property sales in H1'CY22 can be attributed to robust demand for houses. "There is also a renewed confidence in the realty sector post RERA with a better prepared and regulated developer ecosystem. This along with the pent-up demand over the last few years has resulted in the strong sales for the Tier I and reputed developers as witnessed in H1'CY22 and the trend is expected to continue in the medium term."

DIFFERENT TUNES

• Knight Frank says H1CY22 saw a YoY growth of 60% in home sales to 158,705 units 
• Home sales volume in H1CY22 at nine-year high, according to Knight Frank
• Anarock says sales down 15% QoQ in June quarter 
• Home sales could see 17-18% YoY drop in FY23, says Nisus Finance