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Economic Survey Housing prices firming up

By Rishabh Chamoli | 2023-02-02

The Economic Survey 2022 to 23 has highlighted a rebound in the residential real estate sector. The annual survey has pointed to a significant reduction in the inventory turnaround period. It also highlights a rise in demand for home loans and an overall growth in the real estate sector.

Despite the increasing interest rates and rising prices, the realty sector in India has performed well in the current fiscal year. As per the Economic Survey tabled in the parliament, the new home launch numbers, particularly in Q2, have surpassed the figures of Q2 in FY 2020. There has also been a marked increase in disbursals of new home loans.

Key takeaways from the Economic Survey 2022-23
After the COVID19 lockdowns, prices are now rising upward basis of demand and the reduction of stock.
There have been reduced import duties on some raw materials for the construction sector.
At the closing of 2022, the total unsold housing stock was 8.5 lakh.
The inventory turnaround period dropped from 42 months to 33 months.
Around 80 percent of the housing inventory in India is still under construction.
Impact of Russia Ukraine conflict on property markets
The survey has noted that the prices of residential dwellings have increased due to the escalation of costs in the backdrop of the Russia Ukraine crisis. As the global supply chains got affected, Indian markets, too, felt the ripple effects. Prices of cement, steel, chemicals and fuels increased, directly affecting construction costs. According to the survey, With a volatile international market, the surge in construction material prices has pushed developers to halt ongoing construction. The Wholesale Price Index for Cement, Lime and Plaster has increased from 127.1 in December 2021 to 137.6 during December 2022, indicating an uptick in the input cost for construction.

Variation in Housing Price Indices
The Economic Survey also noted a variation in Housing Price Indices (HPI) based on geographies maintained by the National Housing Bank (NHB). For example, if one looks at the 50 cities included in the index, a total of seven cities saw a decline, whereas the rest saw an increase. In September 2022, as per the survey, Indore saw a contraction of 6.5 percent, whereas Bhubaneshwar witnessed a rise of over 37 percent. On the other hand, all major metro cities like Delhi, Mumbai, Chennai and Hyderabad have seen an increase in the annual index.

The Economic Survey has also noted that the pandemic changed buyers sentiments and inclined them towards owning a home rather than renting one.