The current festive season is expected to bolster the Real Estate sector. Team Estrade has a Tate – a – Tate with Rakesh Reddy, Director, Aparna Constructions on these happenings. Following is an excerpt from this conversation,
What is the significance of festive season for the Real Estate sector?
The festive season is considered to be an auspicious time for buying a home. Real estate is still the most preferred investment when compared to other common assets such as gold, fixed deposits and stocks which are heavily affected by volatility. The unpredictability during the past few years has only re-enforced this view of real estate as a safe investment.
The residential sector has witnessed consistent growth over the past few quarters. The first half of 2023 witnessed an impressive year-on-year increase of over 20% in residential sales, highlighting a persistent upward trend. An intriguing observation is that each passing quarter has demonstrated a new peak in residential sales, underscoring the sector’s resilience and potential for continued expansion. This trend is expected to continue into the festive season and throughout the second half of 2023.
How the recent repo rate pause has affected Real Estate market sentiment?
In a widely anticipated move, the Reserve Bank of India opted to maintain the repo rates at 6.5% for the third consecutive occasion. This strategic decision will contribute towards improving market sentiments, particularly in light of this festive season, which is traditionally an opportune time for homebuyers. Overall, this move is in alignment with the broader economic objectives of the country in terms of balancing inflation and growth.
Maintaining the repo rate status quo into the festive season is expected to alleviate the pressure on retail borrowers, especially those seeking home loans, as the cost of financing is likely to remain stable for the foreseeable future. It is noteworthy that the present state of real GDP growth for the years 2022-23 has exceeded its initial forecasts, thereby indicating promising prospects for forthcoming reductions in rates. Moreover, the present growth rate is being sustained at an optimal level, which is highly encouraging.
“The search for larger homes during the festive season is expected to witness a surge in demand for properties situated in the suburbs and less populated areas. In particular, homebuyers are showing a preference for gated communities and suburban townships…”
Home prices have increased over the last year, then how policy rates stability is helpful?
Despite an increase of 10-15% in home prices over the past year, the stability of policy rates is expected to counterbalance this price appreciation. The unchanged interest rates will foster greater affordability, thereby sustaining the momentum of homebuyer activity and residential sales throughout the upcoming quarters.
The prevailing economic uncertainty has made homebuyers take extra precautions and demand greater value from the property. The stability of the repo rates during the festive season will give homebuyers an opportunity to purchase a premium property before prices continue to increase.
The unchanged repo rate will serve to bolster the growth in housing sales, especially in the mid- and high-end markets. It presents an advantageous occasion to upgrade to larger homes without incurring exorbitant expenses. With the growing trend of remote work, an increasing number of businesses are adopting the work-from-home model, making it an ideal time to invest in more spacious homes. The demand for larger, 3BHK homes is on the rise as homebuyers seek to meet the added space requirements for home offices and remote work.
The search for larger homes during the festive season is expected to witness a surge in demand for properties situated in the suburbs and less populated areas. In particular, homebuyers are showing a preference for gated communities and suburban townships, which offer greater comfort, convenience and security. This shift in consumer preferences towards more spacious properties with a wider range of amenities suggests a realignment of homebuyer priorities. With all the benefits these communities offer in terms of providing a holistic living space including modern amenities, green open spaces and connectivity to commercial centres, such properties will be a fast-growing segment this festive season.
What are the Developer offerings for making homes more affordable? Apart from amenities as mentioned above.
Developers also offer price protection plans, innovative payment schemes and even a flat discount on the price of the property to bolster sales during the festive season. Flexible payment plans such as no EMI until possession can translate up to a further 10% discount on the price of the property. Combined with stable repo rates and the recent moves by some states to reduce stamp duty and registration charges, the festive season offers a heavily discounted period for purchasing a home. More states are expected to follow suit to provide an impetus to increase demand in the build-up to the festive season.
What is your future outlook?
A stable repo rate signals the government’s unwavering commitment to uphold policies that bolster the real estate sector. This strategic decision is expected to positively impact market sentiments, particularly with the festive season on the horizon, thus enabling a surge in housing demand while mitigating inflationary pressures. Going forward, it is anticipate that the government will continue to implement industry-friendly initiatives that boost housing sales. The festive season will also see greater demand amid growing interest from the NRI segment, especially with the recent rupee depreciation. These signs collectively indicate that the upcoming festive season may prove to be the impetus required to spur the real estate sector to new heights in 2024 and beyond.
Unchanged repo rate will serve to bolster the growth in housing sales – Rakesh Reddy