Ajay Ashar, Chairman & Managing Director of Ashar Group and Vice Chairman, MITRA, points out that with over 270 associated sectors relying on the real estate sector for business sustainability, this vital industry significantly impacts the entire supply chain. As the real estate domain grows, a positive multiplier effect is anticipated, benefiting related industries and individuals involved.
By Nichola Marie
The real estate sector in India is seeing an astonishing boom. What is the mood like? Do you foresee long-term growth for the real estate sector? What are the factors powering this growth?
India’s real estate sector is undergoing a remarkable boom in 2023, driven by numerous factors such as rapid urbanisation, rising incomes, government initiatives, and foreign investments. This surge in India’s real estate sector is positively impacting the overall economy, resulting in job creation, strengthening GDP growth, and generating tax revenues for the government. Furthermore, it is proving advantageous for homeowners and investors, who are witnessing an increase in their property values.
What are views (if any) on the following trends:
Digital house hunting
Many projects now include entertaining video material, such as virtual tours that show sample flats from various angles, animated walkthroughs of the housing project and its facilities, and real-time construction updates that provide an accurate image of the property and its location. This degree of information reduces the need for multiple in-person visits. Real estate businesses use platforms like YouTube and other social media channels to create a direct contact route with clients, giving a one-stop digital hub for investigating all projects. According to recent industry studies, millennials are the driving force behind India’s real estate sector, and this trend is projected to continue. It foreshadows a future in which real estate businesses must adapt to a more digitally aware consumer base. What started years ago as facilities for NRI consumers and remote prospects have now become mainstream offerings for the entire consumer set.
Migration/transition from cities to suburbs
The demand for flexible office spaces is set to surge by 15-20% in the next 2-3 years, driven by several key factors. One major catalyst is the rapid urban expansion and the emergence of urban pockets both within and outside city boundaries, fueled by government investments in infrastructure.
The suburbs of most cities offer a respite from the congestion and pollution often associated with city living. People are seeking a better quality of life with cleaner air, open spaces, and a more relaxed pace of living. Secondly, affordability plays a crucial role. Suburbs offer more affordable housing options, often with larger living spaces and amenities that cater to modern lifestyles. Thirdly, remote work and digital connectivity have become the norm, allowing people to work from home or have flexible work arrangements. This has reduced the need to live close to city centers, enabling individuals to choose homes in the suburbs that are more spacious and comfortable. Lastly, improved infrastructure and connectivity have made suburbs more accessible, reducing commute times and allowing individuals to access city centers when needed.
This growing awareness has increased demand for flexible office solutions catering to in-person and remote work requirements. Additionally, the rise of MSMEs (Micro, Small, and Medium Enterprises) drives the demand for low-fixed-cost office options, aligning with the strive for operational efficiency seen in established corporations and startups.
In response, companies are establishing offices near residential areas, reducing commute times and improving the overall work experience. In this rapidly evolving business landscape, the synergy of these factors positions businesses for growth and agility, allowing them to streamline procedures, reduce overheads, and stay competitive.
Rise in price of residential properties:
The Indian real estate market is performing well in the second quarter of 2023, with sales continuing their momentum as fresh supply enters. Despite the surge of new houses, prices in main economic areas continue to climb. The ISB – Housing.com Housing Price Index (HPI) indicates a 7.21% growth in property prices during Q2 2023, up from 6.78% in Q1 2023 and 2.83% in Q2 2022. A similar trend can be seen in cityspecific indexes, with property prices in Mumbai, Delhi NCR, and Bengaluru rising by 6 to 15%. This increase in property prices is linked to several causes, including revived interest in house ownership and improving configuration and lifestyle in the aftermath of the pandemic. Furthermore, we also see the pass-through of increasing input costs to homebuyers, which developers were previously hesitant to discharge because of the weak market demand. A premium is also given to the ‘highly desired’ but ‘limited supply’ ready-to-move-in home and specific inventory in certain locations. All of these reasons have contributed to price appreciation of housing throughout cities.
What are some of the challenges that the sector faces currently, and what is the way forward?
The Indian real estate sector is undergoing a revolution. The industry is going through a lot right now, from the aftereffects of COVID-19 to the advent of new technology to the increased anxiety of a worldwide recession. Despite this, India’s real estate market is thriving and everchanging. It has always been a very competitive market, with several obstacles for buyers and sellers. Buyers and sellers face several challenges, ranging from rising land prices to difficulty finding suitable property.
The growing cost of land is one of the key difficulties for buyers and sellers in India’s real estate market. Furthermore, due to the rigorous procedures, acquiring land in India takes a lot of work. This makes it difficult for buyers to discover residences within their price range and for sellers to find buyers ready to pay the asking price. To overcome this issue, buyers and sellers must be more willing to negotiate. Market volatility is another critical factor that impacts the industry both from a buyer and seller perspective. The market may be volatile for both buyers and sellers. Previously, Covid-19 pitted sellers with distinct obstacles due to a decline in housing demand due to the economic slump. Similarly, delays in project building and delivery have impacted purchasers. Despite these obstacles, the Indian real estate industry is resilient and on the mend. Buyers should also be aware of the various negatives when purchasing a property, such as hidden expenditures, potential repairs(in secondary markets), and other concerns. Meanwhile, sellers must be aware of the hazards that might develop when selling a house, such as delayed closings, title challenges, and other problems.