Steep Rises in the Housing Sector: Is it Sustainable?

The real estate market in India has seen a remarkable upswing, making headlines and turning heads worldwide. According to a recent industry report, the top seven prime residential markets in India recorded their highest sales in the first half of the financial year 2022-23, surpassing sales of the last decade.

This surge in sales is not a flash in the pan but the result of a year of astounding progress. In 2022, the residential real estate market in India set new sales records with a 68% year-on-year increase, firmly establishing itself as one of the fastest-growing industries in the country. But the question on everyone’s mind is: will this steep rise in the housing sector sustain?

A Boom Amid the Global Slowdown

The COVID-19 pandemic had a massive global impact, causing economic slowdowns in many sectors. However, the Indian real estate market emerged resilient. After two challenging years affected by the pandemic, Tier 2 and Tier 3 cities in India have emerged as major real estate trends.

The real estate market not only weathered the storm but set unprecedented benchmarks, continuing its growth momentum from 2021 amid the global slowdown. The growing awareness of homeownership and the government’s favorable affordable housing schemes led to significant growth in the affordable housing segment.

People realized the long-term potential of owning a house versus renting, leading to sustainable growth in the segment. An increase in earning potential, a desire for a better standard of living, and the growing base of aspirational consumers spurred substantial growth in the sector. With suited economic growth, even the premium housing segment is projected to witness higher demand in the coming years.

Will the Upward Trend Continue?

As we move across 2023, industry leaders express optimism for the future. Despite expected further downward trends in the global economy, the Indian economy is seen as having the potential to emerge as a world leader.

The real estate sector, in particular, is projected to continue its long-term growth journey, fueled by a rise in GDP per capita, larger disposable incomes, growing urbanization, and India’s growing prominence on the global stage.

Furthermore, India’s strong growth potential is predicted to lead to high demand in offices and commercial spaces, particularly in Tier 1 and Tier 2 cities. This is already evident in the rapid commercial growth observed in cities like Gurgaon, Pune and Hyderabad.

The co-working industry, in particular, has adapted successfully to changing work requirements and is expected to continue servicing the needs of a young and growing India. The co-working sector in India is expected to cross 50 million sq ft by the end of 2023, marking a year-on-year increase of 15%.

Given the current trends and predictions, the steep rise in India’s housing sector appears not only sustainable but likely to continue its upward trajectory. With favorable government policies, increasing consumer demand, and the sector’s resilience in the face of global economic challenges, the future of the Indian real estate market indeed looks promising.

However, like any market, it will be influenced by various factors, including economic policies, consumer behavior, and global economic trends. The key to sustainability will lie in adaptability, innovation, and a consumer-centric approach.