We Indians are hugely price sensitive to say the least. While the famous refrain Kitna deti hain for a yacht as humorously shown in an advertisement is not far from reality, we’re overtly anxious about our investments as well. Real estate is arguably the most important investment that one makes in a lifetime. The sector was not doing well in India until recently when it has got a new lease of life. Now, the question arises whether prices will start rising again in the near future? Prospective homebuyers are eager to know whether they will have to pay more in the future while investors are anxious about whether they will reap higher yields from their property investments if prices go up in the future.
So there’s a clear contradiction in our collective needs and wants but no one can ignore the sheer importance of real estate prices in the country. Property prices have majorly balanced out or come down across India’s top cities in recent years. Will they increase anytime in the near future?
What experts feel about any possible rise in property prices
Several market experts are of the opinion that property prices across major Indian cities will certainly witness an increase in H2 2019-20. They base their argument on the following aspects:
- Higher demand for residential real estate and higher sales volumes in turn.
- Expected sales growth post elections and even higher demand.
- Revival of the property market in recent times with GST rate cuts, PMAY impact and affordable housing growth.
- Proposed measures in Union Budget 2019-20 which will stimulate growth of real estate sector.
The pricing slide was stopped to some extent in some Indian cities since demand for real estate increased in the recent past, thereby balancing out the market overall. Over the last 5 years or so, cities like Bangalore or even Delhi-NCR witnessed a slight reduction in average real estate prices while average pricing went up by approximately 2-3% in cities like Pune, Mumbai and Hyderabad. Developers and industry experts are anticipating positive sentiments in the Indian realty market anytime by the third quarter of the current financial year and onwards. With increased demand, prices will naturally go up for residential real estate across the country.
Hyderabad was reportedly one of the best performing real estate markets in the country for the last fiscal. It is also expected to witness swift growth in the current financial year as per experts. Bangalore had solid growth in Q4 FY2018-19 with total sales volumes going up by 4% on a quarter on quarter basis. 8,800 units were sold in Bangalore in this period while growth of 3.5% was seen in Delhi-NCR where 13,270 units were sold. Mumbai and Pune also had slight growth of 0.1% and 1.3% in sales volumes with 18,000 units and 11,200 units sold respectively in the last quarter of the previous fiscal.
Several developers opine that sales volumes are reviving thankfully and in spite of a somewhat flat housing market, prices have been appreciating across top residential projects. While not expecting the realty market to rise again like a phoenix, developers are optimistic about price rise in the near future. Price growth could be higher than inflation as per a large section of experts.
The Government has already taken several positive steps to boost housing demand and the RBI (Reserve Bank of India) has also played its part by cutting repo rates twice. The RBI’s reduction of key policy rates will now make home loans even more affordable for potential buyers. Experts also feel that various policies and measures will have a positive impact on the sector in 2019 although buyers may be postponing decisions till the elections are completed.
Will prices rise or won’t they?
While several experts opine that prices may rise from the second half of 2019 onwards once the elections are completed and there is a surge in demand levels, others beg to differ. Some experts go by earlier studies which forecast growth in housing prices at almost half the inflation rate and not more than this figure. This will be on account of the lower liquidity in the market overall. The Capital is likely to be impacted the most in terms of low growth in prices.
These experts feel that double-digit growth has been seen in case of home prices for more than a decade but the brakes were applied earlier and the trend will continue at least for the immediate future. The overall liquidity crisis in the housing sector due to the IL&FS saga will have an impact since funding channels from banks and NBFCs have dried up for real estate developers. The crunch in overall liquidity may be pushing prices downwards or at least keeping them on the flatter side as per these experts. These are experts who expect 2.8% growth in 2019 for real estate prices and growth of roughly 2% in average property prices for 2020 which will be around half of inflation in consumer prices as forecasted by experts.
Will they or won’t they?
Which way do you think the real estate market will go? Will prices increase? Well, only time can tell although the market has revived recently and is witnessing positive trends. Of course, the ideal scenario would be healthy appreciation in property prices for investors without getting into unaffordable territory since buyer aspects have to be taken into account as well. Market fluctuations are just like the Indian weather system- unpredictable yet all so familiar! Let’s hope the realty market finds the ground beneath its feet after the elections are over.
