Home ownership demands are expected to increase or remain stable in 2023

About 58% of developers across India expect housing prices to increase further in 2023, according to the Developer Sentiment Survey conducted by CREDAI, Colliers, and Liases Foras. Demand for homes and volatile key input costs simultaneously increased the housing prices in the Indian market. A joint report by Colliers-CREDAI-Liases Foras, on Real Estate Developers’ Sentiment Survey 2023, summarizes perspectives of developers on how the residential sector spanned out in 2022 and which transects the sector is anticipated to follow in 2023.

Disruption in global chain supply leads to inflationary pressures, as the cost of raw materials has increased in the last two years. Compared to 2021 about 43% of the developers saw a 10-20% rise in project costs through rising input costs. Colliers mentioned in its construction cost Update on November 2022, that the key construction material costs have increased by around 32% in a span of three years leading to increased construction costs for the developers.

Record-breaking sales in the previous year in the last decade, encourage more than 70% of developers to believe the housing demands will increase by 25% or remain stable in 2023. Most of the developers in the community are looking to expand their offerings and the year is expected to see a surge in new launches equal to the current supply under construction. Key factors such as Rising population, wealth growth, and rapid urbanization are stimulating the industry’s growth. Thus, in order to maintain the momentum, nearly 31% and 40% of developers respectively anticipate that the government will rationalize/ income tax credit, GST, and ease of doing business, said Harsh Vardhan Patodia, President of CREDAI National. 

Ramesh Nair, Chief Executive Officer | India & Managing Director, Market Development, Asia, Colliers said that since the pandemic, there has been a constant preference for home ownership leading to an increase in enquiries for developers across the spectrum in 2022. According to the survey, the developers remain confident about the market. About 43% of the developers anticipate that residential demand in 2023 would remain stable. Despite increasing loan rates, homebuyers are still excited to buy homes. Developers are also formulating strategies to complete their pending projects and focusing on launching new projects that are aligned with the needs of the homebuyers and bring in demand-led supply. 

A survey revealed that 62% of the developers feel that buyer enquiries and engagement have increased in 2022 as compared to 2021. 43% of the developers anticipate constant residential demand in 2023, while 31% predict that the demand would increase by up to 25%. 43% of the developers witnessed a 10-20% rise in project costs in 2022 due to increasing input costs. As an alternative business model, 31% of the developers are willing to consider plotted developments, followed by branded residences preferred by 19% of developers. About 39% of the developers expect better ease of doing business from the government in 2023, while 31% expect rationalization/ Income tax credit GST. Almost half of the developers expect that a predicted downturn will moderately impact their business. “2022 witnessed the highest-ever sales and new launches across major cities in India. Liases Foras, Managing Director, Pankaj Kapoor said, “We have also seen a marginal increase in property prices. The market is expected to retain the momentum that the sentiment survey re-affirms”. 

About 31% of the developers are willing to explore planned developments as an alternative business model, whereas 19% of the developers preferred branded residences which were considered favorite by the majority of developers. Demand for self-contained residential complexes has risen due to rising disposable incomes and an increased desire for top-notch amenities and open areas. With lower land rates and flexibility, plotted developments are also becoming popular among homebuyers, especially in tier II cities. 

Around 87% of the developers are willing to launch new residential projects in 2023, the upcoming year is expected to witness a surge in new launches. Despite inflationary pressures and any significant turndown, this encourages optimism among developers. However, developers are probably adopting a wait-and-watch approach to see how the economy, job freezes, and layoffs pan out over the coming few months. The developers request easy business from the government. 

The survey states that ‘Ease of doing business’ is developers’ top expectation from the government. The government announced the launch of ‘Ease of doing business 2.0’, in the Union Budget last year. The sector anticipates more clarity and guidelines for the index, including aspects such as single-window approval. 

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