The big picture of the entire Indian economy heading into 2023 displays what can only be translated as positive signs, an 8-9 per cent overall growth, an expected rise in the jobs created, and a bounce back from the recent slump in the stock market. All these would ultimately contribute to an increase in the demand for housing as more people would enter the housing market, which is something very important for the health of the real estate economy. Apart from speculation, we know for a fact that the government has been planning and implementing infrastructure mega-projects such as highways, new airports, metros, etc as well as major policy initiatives such as “Housing for all” and the Pradhan Mantri Awas Yojana. It would be redundant to state the obvious in how such things drive growth quantitatively and qualitatively in real estate assets.
Experts also believe that low-interest rates could also make a significant positive impact on the real estate industry, adding to that are the government’s recent rollout of numerous tax-related and other incentives aimed towards potential house buyers as well as streamlining of the mandatory bureaucratic work. The often overlooked and passed-on tier 2 and 3 real estate markets stand to benefit the most from such positive developments and it’s highly likely that they would fetch investors handsome returns.
Commercial real estate, one of the most attractive assets in the real estate game, is also set to see healthy returns as major IT companies are switching back to offline work. Many retailers that were wary of getting physical stores during the pandemic are now gradually coming around to opening in-person stores.
E-commerce firms are also in a race amongst themselves to spread as widely as possible by expanding their warehousing and logistical operations. IT giants like Intel and Apple are moving a significant chunk of their manufacturing to India and more companies are to follow suit as India could soon rise among the world’s top silicon chip manufacturers due to the current state of affairs between China and the U.S.
The housing market, the driver of growth and sustainer of the entire real estate economy is poised to witness an extremely impressive and potentially its best year in the near future. Residential sales are up by a whopping 51 per cent post the Covid-19 period. According to Reuters, prices are expected to rise nearly 7.5 per cent all over India (4-5 per cent in Mumbai and Delhi, 5.5-6.5 per cent in Chennai and Bengaluru) and a number of other economic indicators also favor a positive uptick.
This does not mean that the real estate economy is perfect and doesn’t have any weaknesses, as many things could in fact pose a challenge to growth such as increasing mortgage rates, inflation, and building material shortages. As long as these issues remain limited in scope and localized, they do not spell anything major and may indeed be benign. A growing economy, a return to the pre-pandemic working state, and the various government initiatives all combined are creating a very conducive environment for the prosperity of the real estate market in the years to come.
(Harrish Kumar Jain, Vice President of Brihanmumbai Developers Association – BDA)