Housing market traits present finish to downturn

The Indian residential property market is progressively popping out of considered one of its worst downturns. The new provide and gross sales traits within the newest quarter (April – June 2022) are encouraging and recommend that builders are returning to the market, with new housing provide reaching a seven-year excessive. The demand momentum has additionally sustained tempo, indicating a optimistic market sentiment in the direction of investing within the property market.

To gauge the current market trajectory, we use the Housing Price Index (HPI) with the assistance of, https://www.housingpriceindex.in/ collectively developed by the Indian School of Business (ISB) and Housing.com. We observe housing costs and amount bought in eight main cities throughout India.

From the mixture worth index for India, we notice a marginal enhance of 0.4% in common costs between April and June 2022. This determine was round 0.3% throughout the identical interval final 12 months. The development of minimal rise in costs noticed throughout the previous few quarters has continued in the course of the previous three months too. The Y-o-Y enhance in costs in June 2022 was 2.8%. The marginal worth hike comes on the again of rising prices owing to inflationary pressures and in addition the premium hooked up to the ready-to-move in properties, that are in excessive demand, post-pandemic.

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From the Quantity Index throughout the top-eight cities, property gross sales on common, have witnessed an upward development over the previous six months. The index was above the 2017 base of 100 for the complete Q2 of this 12 months. This has occurred for the primary time ever because the pandemic began. Though shifting inside shut ranges, the sequential progress in amount index is a optimistic signal for the market. We ought to emphasize that the present market is primarily pushed by the end-user. Hence, though the expansion of the index is slow-paced, it’s the sustained demand momentum which is guiding the W-shaped restoration out there. The amount ranges are properly above March 2020 ranges; nonetheless, they’re but to achieve February 2020 ranges. At the tip of June 2022, the variety of items bought throughout the nation is round 8-9% decrease than pre-pandemic ranges (February 2020).

Along with combination numbers, HPI additionally gives insights into granular city-level traits. The worth traits on the city-level are just like the all-India index. Quantitatively, the worth change has been between 0-2% for all cities besides Mumbai which registered a 0.33% fall in its costs in the course of the quarter. In distinction, the amount index on the city-level affords attention-grabbing insights. The numbers are properly above the pre-pandemic ranges for Mumbai, and it has reported a rise of round 22% from January to June 2022. The sturdy rebound in gross sales is principally coming from the rise in gross sales in Mumbai. However, different cities too have continued to witness average progress up to now six-months.

Having witnessed a W-shaped restoration after the second wave of Covid-19, this optimistic outlook and upward traits although want a cautious studying. The upward traits are constantly challenged by international inflationary pressures, reversal of Central banks’ accommodative financial coverage stance, spillover of geopolitical tensions, and different monetary market volatilities, that are dampening progress momentum.

As we transfer forward, a sequence of price hikes are imminent within the second half of the 12 months. This could be in continuation of the present set of price hikes by the Reserve Bank of India because it continues to tame inflation. On the opposite aspect, this excessive inflation has negatively impacted the shoppers’ actual earnings on the demand aspect and the enter building prices for the availability aspect. Both can have a dampening impact on the property market within the brief time period. However, given the renewed significance of residence possession and residential mortgage charges nonetheless under their pre-Covid ranges, motion of fence-sitting homebuyers could be essential in figuring out the market momentum.

(Ankita Sood is director and head of analysis at REA India, Shekhar Tomar is an assistant professor of Economics at ISB and Saiganesh Ramesh is a analysis affiliate at SRITNE.)

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