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Land Rush for Homes as India’s housing Soars

Posted by Pal on July 19, 2023
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The housing market uptrend drives more land parcels under residential developments.

The Indian real estate sector is witnessing a strong recovery. After the pandemic-induced slowdown, as developers across the country are acquiring more land parcels for residential projects. Data from JLL India shows that developers allocated around 84% or 1,822 acres of the total 2,181 acres of land transacted between January 2022 and May 2023 for proposed residential developments. This indicates augmented capex utilisation aimed at clocking higher sales in the upcoming housing market uptrend.

The demand for residential properties is driven by various factors. Such as low-interest rates, attractive offers, government schemes, changing consumer preferences, and increased affordability. The real estate sector is expected to reach US$ 1 trillion in market size by 2030. Up from US$ 200 billion in 2021 and contribute 13% to the country’s GDP by 2025. More non-resident Indians (NRIs) are expecting to invest in the housing market, both in the short and long term.

Some of the key trends that are shaping the housing market in India are:

Digital house hunting: Technological advancements such as 3D modelling and virtual reality have pushed innovation in the real estate market. Consumers can now search, view, and book properties online without visiting the site physically. This makes the process more convenient and efficient for both buyers and sellers.

Migration/transition from cities to suburbs: The pandemic has shifted consumer preference from congested urban areas to spacious suburban locations. Consumers seek larger homes with amenities like balconies, gardens, and work-from-home spaces. These features provide more comfort and flexibility for the residents, especially in times of social distancing and lockdowns.

Rise in price of residential properties: The housing market has witnessed a surge in prices. It is due to the limited supply of ready-to-move-in properties and the rising cost of raw materials. The average price of residential properties in the top eight cities increased by 4.4% year-on-year in Q4 2022. This indicates a strong demand for housing in the urban centres, despite the economic challenges posed by the pandemic.

Also read: Bengaluru UPOR Project: Digitising Properties and Streamlining Land Records

A decline in mortgage rates: The Reserve Bank of India (RBI) has maintained a low-interest rate regime to support the economic recovery. This has resulted in declining mortgage rates, making home loans more affordable for consumers. India’s average home loan interest rate was around 6.8% in March 2023. This encourages more people to invest in their own homes, rather than renting or leasing.

Government schemes & offers: The government has introduced various systems and incentives to boost the housing sector, such as the Pradhan Mantri Awas Yojana (PMAY), which provides subsidies for affordable housing. The extension of the tax holiday for affordable housing projects till March 2022. Furthermore, the reduction of stamp duty and registration charges in some states. These measures aim to make housing more accessible and affordable for the low-income and middle-income groups, as well as to stimulate the construction industry and create employment opportunities.

The outlook for the housing market in India is positive. As the sector is expecting to witness robust growth in sales and launches in 2023. The increasing demand for residential properties will also spur more land acquisitions. The developers, leading to more supply and diversity in the housing market uptrend. In the coming years, the real estate sector will drive India’s economic growth and development as one of its key sectors.

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