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Here Are Some Key Demand Drivers That Have Shaped The Indian Housing Market

By Rishabh Chamoli | 2023-02-03

The realty sector showed signs of healthy growth in 2022 due to which experts anticipate the momentum to continue this year as well

Housing demand stayed upbeat
With approximately 3,64,900 units sold in 2022, real estate barely had any dull moment, as per data shared by Anarock Group. Anuj Puri, chairman, Anarock Group mentions, Housing sales remained upbeat throughout 2022, and this sales momentum is expected to sustain well into the first quarter of 2023. Thereafter, a lot shall depend on other factors such as the repo rate hikes, increase in property prices, and not just the homebuying sentiment. 2022 saw the repo rate go up by almost 225 bps, and home loan interest rates lost no time in going up concurrently all these factors are bound to play a role in how much a home aspirant can afford.

Millennials played a key role
Elaborating on millennial buyers and their interest in homeownership, Anil Pharande, chairman of a leading real estate firm says, The fact that millennials developed a strong affinity for homeownership last year is a case in point. This generation, which typically favoured renting over buying, had for long been considered a lost segment when it came to residential property investment. However, the year gone by once again proved that Indian residential real estate is a dynamic market that reacts to new impulses.

Pharande further shares the must have amenities that millennials are looking for when they go home hunting today

A jogging track, an equipped gymnasium, swimming pool, clubhouse, and facilities for other sporting activities
Well maintained green open areas to soothe the senses and provide lung space to replenish the surrounding air quality
Modern sustainability features such as wastewater treatment, waste collection and recycling system, solar panels as an energy source to power common areas, rainwater harvesting, and ready access to public transport to reduce reliance on personal vehicles.
The rise of the suburbs
The walk to work concept, which involves compact homes around workplace hubs in expensive city centres, lost traction in 2021 to 22. The suburbs shone despite work from office and physical school attendance resuming. 42 per cent of respondents in the latest Anarock Consumer Sentiment survey continued to prefer peripheral/suburban areas where they can buy bigger homes with better lifestyle amenities at lower prices. Only 10 per cent of respondents still chose city centre locations and only 23 per cent wanted to be within city limits. The rental market, however, saw a resurgence, as more companies started calling their employees to office (with many opting for a hybrid model). Rental market demand not only reached pre pandemic levels, but also surpassed them, and many housing societies have a few or no vacancies. Rentals rose by 20 to 25 per cent against pre pandemic levels, with some of the more popular societies seeing more than 30 per cent increase, says Puri. Financially speaking, the demand for affordable housing declined, and mid range and premium housing dominated launches.

The mid range (Rs 40 to 80 lakh), premium (Rs 80 lakh to Rs 1.5 crores), and luxury segments (>Rs 1.5 crore) were the showstoppers of 2022;
In contrast, affordable housing had a lean time, with more buyers in this segment going into wait and watch mode unsurprisingly, new supply in this category reduced markedly
As per Anarock data, in the pre Covid19 year (2019), affordable housing had the highest supply share with 40 per cent of 2,36,560 units launched in the top seven cities
In the first nine months of 2022, affordable housing supply reduced to 21 per cent (with approx. 2.65 lakh units launched in the top seven cities during this period).
Overall, readings from Anarocks Consumer Sentiment survey indicated that if home loan interest rates rise above 9.5 per cent mark, one can expect to see contraction in the overall housing demand this year.