Real estate will be the major sector to look forward to in India, as it has witnessed enormous growth in the past year, reviving quickly after the pandemic. The industry is rapidly growing making it one of the key sectors contributing to the country’s economic development.
After the pandemic residential properties have been in huge demand hybrid work culture, safe neighborhoods, cleanliness, and fully loaded properties are the factors which encouraged people to own residential properties.
The year 2023 will also see a huge development as 2022, these followings are some of the trends that will influence the real estate sector in the coming years.
Ease in a rental house
2022 witnessed a steep elevation in home rentals for any year in the last decade. along with a severe shortage of homes and a few micro-markets in Bangalore (Whitefield, HSR layout) witnessed rentals jumping by 40-50 percent. As companies resumed work from the office, this met the shortage of supply in rental homes as certain projects were delayed due to COVID.
Work had come to a standstill during COVID and very few new projects were launched in 2020. Therefore, under-construction projects were forced to push possession dates.
As the market retains its steady state will show ease in house rentals with new supply expected to be ready in 2023.
Constant housing demands
In India, the residential real estate market has broadly remained flat from 2014 up until 202. Multiple issues such as COVID, demonetization, and implementation of RERA have held the market back for close to seven years.
housing demand and house prices have seen an uptrend from Q2 of 202. As compared to 5-10 years ago, with the recent increases in the repo rate by the RBI, interest rates are fairly reasonable.
Housing demands are expected to remain high in 2023 until interest rates for home loans remain reasonable.
increasing rental yields and absorption of commercial real estate
Grade A office spaces in metropolitan cities have increased in demand expecting to retain the same in 2023. While post-pandemic, the design for office spaces is witnessing changes, the fundamental requirement for office space remains with more zones for collaborative working.
Office space absorption is expected to continue, as it has touched historic highs in 2022.
However, compared to residential real estate, commercial real estate rental yields are far more sensitive to interest rates. We could see higher rental yields with higher interest rates and accordingly lower prices for Commercial properties. We can see that prices of REITs are already decreased by 4 and 10 percent over the last couple of months, these are great indicators of higher rental yields in 2023 with high interest.
More demands of Larger townships and gated communities
Integrated townships and large gated communities demand have seen an increase over the last couple of years. These townships offer various sports and leisure facilities, community living, better security, and the convenience of having everything in an enclosed setting.
These townships have green surroundings and are free from traffic and congestion, as they are located in suburban areas.
The majority of people are choosing to move to these townships and live further away from their offices, as offices are also designed for flexible work environments eliminating the need for people to commute to the office every day. Over the last two years, prices for homes in larger communities have appreciated a lot more than the standalone buildings.
Developers are also launching many more such projects, and the trend is expected to continue.
Investment in real estate has been considered unattractive by the majority of young professionals. Lower price returns over the last 5-7 years along with easy access to investing in equity have led to this feeling. Despite having enough liquidity, many professionals choose to rent rather than buy.
Reversing a long trend of a flat market, 2022 was a breakthrough year for residential real estate in India. The coming few years could finally see many young professionals making their first home purchases. This is expected to continue over the next few years along with growth in our economy as well as increased migration into cities.