Home prices up on strong demand; Mumbai, Bengaluru lead with 9% rise

Property markets across India are witnessing appreciation in residential prices supported by robust uptake in sales owing to realisation of need for housing among homebuyers, lower interest rates and a quick rebound in economic activities post waves of Covid19 pandemic.

Housing prices have grown in year-on-year terms during the first half of 2022 across all markets for the first time since the second half of 2015.

In the first half of the year ended June, housing prices increased across top 8 markets in the range of 3%-9% from a year ago with some of the larger volume markets registering notable growths. While Mumbai and Bangalore led the price increase with 9% rise each, the National Capital Region and Pune recorded 7% increase each, showed data from Knight Frank India.

“Home buying has witnessed a strong rebound since the advent of the pandemic and continues despite inflationary concerns in the economy. The interest rate cycle having turned during this period has impacted affordability, but the performance of the broader economy and changed buyer perceptions have had a greater bearing on market momentum for the remainder of the year as it dictates homebuyer income levels and demand much more directly,” said Shishir Baijal, CMD, Knight Frank India.

With sales of 158,705 units, the first half of 2022 posted the highest sales volume since the second half of 2013 for any half yearly period. Sales registered an on-year growth of 60% in the first half of 2022.

“Improved economic confidence, healthy income growth, the now declining pandemic which has stimulated the need to own a home, have all worked in favour of home sales. Despite the two successive rate hikes by the RBI towards the fag end of first half of the year, interest rates are still lower than earlier times. Input cost pressures have been there, but the market has absorbed it well, which is reflected in both sales and price growth,” said Ramesh Ranganathan, CEO, K Raheja Corp Homes.

The robust volume in sales has significantly increased real estate prices across all markets homebuyers’ need to upgrade primary lifestyle, low interest rates and comparatively low home prices to the pre-pandemic levels along with the renewed need for home ownership sparked by the pandemic, have been the primary drivers for this growth.

Developers also strategically responded to the demand momentum and the shift in sentiment, and launched 160,806 units in the first half of 2022, up 56%. This is an 8-year high in terms of launches for any half-year period.

Despite higher number of launches, strong growth in sales velocity, has led to a modest decline in unsold inventory which level dipped marginally to 440,117 units as on June end and also brought the Quarters to sell (QTS) level down to 7.8 quarters from 10.9 quarters a year ago.

Mumbai, Delhi-NCR and Bangalore contributed the most to the sales activity. The country’s financial capital’s sales volume of 44,200 houses accounted for 28% of the total sales amongst the top 8 cities, highest among all markets.

In terms of annual percentage increment, NCR witnessed an increase of 154% with sales volume of 29,101 units. Besides being the biggest mover, NCR accounted for the second largest share of sales amongst the eight markets of the country.

Bangalore had a similar strong performance with annual sales growth of 80% in the first half of 2022 to 26,667 units as increased hiring and steady income growth in the Information Technology (IT) sector-dominated market, also buoyed homebuyer demand.

The share of sales of homes costing over Rs 1 crore and above grew to make up 25% sales in the first half of 2022 compared to 20% a year ago. This can be attributed to the homebuyers’ need to upgrade to larger living spaces with better amenities, and to the fact that pandemic-induced income disruptions did not impact higher income categories as they did for the others.

On the contrary, the share of homes in the Rs 50 lakhs-Rs 1 crore category declined to 34% as against 39% a year ago. The Rs 50 lakhs and below category declined marginally to 40% from 42%.

On the office market performance, all the top eight cities recorded transactions of 25.3 million sq ft during the first half of 2022, whereas the office completions were recorded at 24.1 mn sq ft in the same period.

Bangalore and Pune office markets recorded maximum annual growth in rental value at 13% and 8%, respectively owing to higher demand. Hyderabad, Mumbai and NCR also witnessed moderate increase in their rental values whereas the rental values in Chennai, Ahmedabad and Kolkata remained stable.