How is India’s residential real estate market likely to fare next year?

Real estate stocks could see an upswing in the coming year, as demand for residential real estate is likely to go up in 2022.  

According to Anarock Property Consultants, the Indian residential real estate market seems to have embarked on a long-term upcycle, and 2022 is very likely to fare better than 2021. 

“With COVID-19 now having become a more accepted part of life and Indians getting used to the new normal, businesses are looking to expand. Compared to 2021, the residential real estate market in 2022 will see lower volatility,” Anarock said, according to a report by The Financial Express.

How have the last couple of years been for the real estate market, especially in the wake of the pandemic?

According to Anarock, 2020 was a tough year for the Indian residential market as the first wave of the pandemic brought everything to a standstill. Nevertheless, all industries — including the real estate sector – emerged from the nationwide lockdown in 2020 with a valuable sense of resilience, damage-limiting skills and a new way of envisioning the business environment – especially in terms of technology adoption.

As such, confidence at the beginning of 2021 was high and real estate developers as well as brokerages were well-prepared to face any possible future disruptions, the report says.

But what do the actual numbers say about how 2020 fared for the housing sector?

According to an Anarock study cited by the newspaper, 1.28 lakh units of new residential units were added to the total supply across the top seven cities of India in 2020 while 1.38 lakh units were sold. From the previous peak of 2014, supply was down by 77% and sales were down by 60%.

“This large-scale decline indicated that the Indian residential market had bottomed out in 2020 and was likely to enter a long-term upcycle from 2021 onwards,” the report says.

Anarock chairman Anuj Puri said the overall performance of the housing market in 2021 shows a definite upswing. He said that, between January and September 2021, 1.63 lakh units of new residential supply were added across the top seven cities – 27% higher than 2020 full-year supply – and 1.45 lakh units were sold – 5% higher than in the whole of 2020.

“While this depicts a cumulative trend, the Indian residential real estate sector’s comeback after the second wave in Q2 2021 was phenomenal, sharp V-shaped one,” he said in the news report.

And how did the sector do in 2021?

In 2021, a bull run was witnessed not only in real estate stocks but also in the broader market. Ample liquidity targeted the stock markets on the back of satisfactory return expectations. While the arrival of the Omicron strain towards the end of 2021 has slowed this movement to some extent, mid-to-long term prospects remain positive as COVID-19 has been reined in to a large extent in India, and most businesses are back on track.

“Overall, real estate stocks boomed in 2021 as developers garnered good sales and were actively launching new projects. After the first wave, the real estate sector’s recovery was pronounced and improved even further after the second wave as the sector imbibed new learnings to overcome challenges,” the report cited Puri as saying.

So, are any signs of consolidation visible?

Yes, if the report is to be believed, in a visible consolidation mode, the sector now has large players commanding a significant share in overall housing sales. Housing demand remains high as Indians continue to spend considerable time at home due to work from home and remote working.

“Also, the macro conditions support home purchases with the interest rates on home loans are at a decadal low (starting at 6.5%) and the overall employment scenario looks secure enough to support long-term financial decisions,” the report said.