Rewinding 2022 for Realty- How did 2022 turn out for real estate sector? Growth Factors and its Future Outlook in 2023

Rewinding 2022 for Realty - Jettisoning the pandemic headwinds, the realty sector made a strong comeback this year, banking on several growth-supporting factors like renewed housing sales, a boost in customers’ demands and activity, the decrease in unsold inventories, which led to a subsequent rise in project launches. 

The housing sector saw an ‘amelioration period’ after nearly two years of revenue lull and sales tanking due to Covid-19 social distancing restrictions and an absolute economic shutdown brought into effect to decrease the mortality rates caused by coronavirus.

However, the path to normalcy was not a cakewalk in 2022 as the sector was roiled with a rapid increase in construction material prices, input costs, supply chain disruptions, and a stark increase in home prices, which could impede its progress. The escalation of the Ukraine-Russia war had its recessionary impact, too, felt by several industries, including realty, construction, and infrastructure divisions.

Commenting on the future expectations for real estate performance in 2023, Ankit Kansal, Founder & MD, 360 Realtors, “2023 will be one of the most promising years for Indian real estate in recent times. After a prolonged period, we are witnessing demand outstripping supply, which will make it a seller’s market. Property prices will continue to grow, which in conjunction with recent growth in interest rates will drive first-time homebuyers to make quick decisions. Households who already have homes might think of opting for a second home or retirement villa."

"Besides the organic surge in demand, India’s bullish economy will also bolster the sector toward an accelerated growth trajectory. India will remain one of the bright spots in the global economy with most of the rating agencies projecting growth in the range of 7-9% in the next fiscal. This will consequently drive both housing and office demand. India already is registering a jump in disposable income and expansion in the labor market, which are very positive signs for realty demand. Investors will also gravitate toward the market, lured by growth in appreciation and rental income,” he added.

Mr Harsh Trehan, Managing Director, Trehan Group said, "The real estate sector went through a torrid time since 2013-14, but the year 2022 turned out to be a watershed year for the real estate sector. All the segments of the sector - luxury, mid-segment as well as affordable housing witnessed a surge in demand."

"There was a significant rise in demand for independent floors and plots, among the home buyers, both in metropolitan cities and smaller towns. The momentum in the real estate sector is likely to continue in the new year on the back of overall economic recovery, pay hikes and improvement in business sentiments," he added. 

Here are the factors which supported the development trajectory of the realty sector:-

Expansion in Market Size

2022 can be termed a ‘watershed year’ for Indian realty. A report by valuation and consulting firm RBSA Advisors stated that India’s realty market is expected to burgeon by 15%. From $ 60 billion in 2010, the sector is expected to touch the figure of $1,000 billion by 2030 and contribute 13% of India’s GDP by 2025. There is intense anticipation that the Indian realty sector’s contribution to India’s GDP will surge to 13% by 2025, which currently stands at 6-7%.

Luxury RE boom

Though luxury realty home prices have increased by substantial margins or have been fairly maintained this year, the sector underwent a booming phase. Infact, in 2022 this segment has individually outperformed the sales figures compared to the last good year for the real estate sector which was in 2019. There was an expansion in the customer radius as well.

Wealthy-class citizens, which are referred to as High-Net-Worth-Individuals(HNIs), have chosen luxury properties as their permanent residence. The expansionary motives of NRIs were also quite evident, with reports indicating only a further increase in their real estate investments.

Pradeep Aggarwal, Founder and Chairman, Signature Global noted "During 2022, the real estate witnessed a sharp recovery amid a surge in demand from end users. While all the segments of the sector reaped benefits of the surge in demand, it is the affordable and mid-segment which stood out. Reasonable pricing, lower interest rates and an abundance of offerings prompted end-users to book their dream homes and as a result, 2022 turned out to be one of the best years. The situation is likely to remain similar even in 2023, particularly for affordable and mid-segment housing."

Rohit Mohan, Senior Vice-President, BPTP Group, said, “In complete certainty, we can say that 2022 was a relatively good year for luxury realty. All forms of luxury housing, Independent Plots, Independent Floors, and High-rise residential avenues saw immense growth. The location of a project became an even more critical evaluation point for realty investments. Further progress in completing the Dwarka Expressway, FNG Expressway and Delhi-Mumbai Industrial Corridor amplified the real estate value of regions like Gurugram and Faridabad. It scaled up the connectivity element, which ramps up growth opportunities in the region. 2023 will also be a great precursor to broadening the horizons of growth in the realty sector.”

Commercial RE boom: Greater Absorption of Office Spaces 

The return-to-work-from-office-mode-of-working has fuelled the demand for office spaces. A mid-year report of International real estate advisory firm Savills India indicated this. The report said that the office space absorption stood at 30.4 mn sqft across India’s six major cities, with Bengaluru, Delhi NCR and Pune topping the line of investment. The report further elaborated that the office space absorption recorded a 130% year-on-year growth till June 2022. 66% of office space leasing activity occurred in H1 2022 in Delhi-NCR, Pune and Bangalore. Another report by CBRE-CII outlined that office space absorption is pegged to touch 53-57 million sq. ft. by the end of 2022.

Harpal Singh Chawla, Director, Spaze Group, said, “Different real estate corridors have clearly increased prices. This is the immediate result of repo rate increases, which inevitably cause a rise in property prices. Despite regional and global economic pressures, there has been a strong demand for real estate projects, especially the commercial segment, including Shop-cum-Offices(SCOs) and mixed-use projects, as more people become aware of the long-term appreciated advantages of real estate investments. The most significant price growth has been seen in Gurugram, which reflects both the appeal of the corridor and the speed with which buyers have acquired properties. Additionally, there has been a noticeable surge in pricing models in areas near the Dwarka Expressway. It consistently demonstrates a rise in property demand as well as how Gurugram has become a well-liked area for homebuyers to settle down.”

Shiv Parekh, founder of fractional real estate investment platform hBits noted, "A heartening trend in 2022 has been the return and consolidation of demand for office spaces. Premium office spaces have attracted investors, thanks to a sharp uptick in demand by IT companies, software, and BFSI firms. "Moreover, the growth of co-working spaces, reverse migration back to cities, and MNCs making India their new APAC bases have contributed significantly to the numbers in 2022, he further said.  

Future Expectations

With a firm footing achieved this year, expectations are naturally high for 2023. The realisation of earning capital income through the possession of homes has also marked a stellar uptick. On the other hand, demands of residential plots have witnessed remarkable price appreciation, with a report stating that the prices of residential plots appreciated by 7% (CAGR) annually since 2015 across eight major cities during this 7-year-long period.

Sharing his version of how 2022 ended for the realty sector, Nayan Raheja, Raheja Developers, “A strong demand for homes across segments has augmented the realty sector growth post-pandemic. While luxury category has seen visible foreign and NRI interests, plots have also witnessed great traction with growing price appreciation. Farmhouses remain a rich-class indulgence, while independent floors are becoming preferable investment category for home buyers who prioritize personal space and privacy. The realty sector projects a positive growth and looks towards another year filled with rising customer engagement.”

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