The review highlights that the recent dip in demand is likely temporary, hinting at a rebound.
“Residential demand seems to have moderated in the urban real estate sector after a sharp uptick in the previous four quarters. As per real estate research firm Proptiger’s quarterly report, housing sales in India’s top 8 cities declined by 5% in the quarter ending September 2024,” the review noted.
Addressing a possible uptick, the review, taking cues from Proptiger’s report, states that “the current tempering is a healthy response to rising prices and is expected to contribute to sustainable growth. Market fundamentals remain strong, and real estate continues to be a preferred investment option amid positive consumer sentiment. Developers have also aligned their supply strategies, evident in a decline in new unit launches.”
Echoing these sentiments, Dhruv Agarwala, Group CEO of Housing.com & PropTiger.com, remarked, “Over the first two quarters of FY25 (April to September), new residential supply has been subdued due to several factors, including inflated home prices driven by investor speculation. Developers have largely adopted a cautious ‘wait-and-watch’ approach. However, we expect heightened activity in the housing market in the October to December quarter. With the Navratri festival starting on October 3, followed by Diwali at month’s end, and culminating in the Christmas-New Year season, a surge in new launches across major cities is anticipated.”
“Despite a slowdown in new launches from branded developers, demand remains strong for prime locations among end-users and investors. Developers are offering discounts and incentives to attract buyers, which is likely to drive sales. Additionally, the potential for an interest rate cut in the upcoming RBI monetary policy could further boost housing demand, already robust post-COVID,” Agarwala added.
Niranjan Hiranandani, Chairman of the Hiranandani Group and NAREDCO, also sees a positive trend emerging in the festive season, expecting it to spur growth in the sector.
“As we enter the festive season, there is a resurgence in home-buying sentiment across India, blending cultural beliefs with favourable economic conditions. Traditionally, this period symbolises prosperity, making it an ideal time for property investments. Current market dynamics support this sentiment: with mortgage rates at historic lows due to the RBI’s unchanged repo rate, affordability has improved, especially for middle-income and first-time buyers. Government incentives, like the PMAY subsidy, continue to drive demand in the affordable housing segment. Additionally, a shift towards larger living spaces, influenced by post-pandemic lifestyle changes, is stimulating demand in the luxury segment. In metro and tier 2 cities, there’s a clear preference for projects with strong infrastructure, healthcare, and education access. This indicates that today’s homebuyers value holistic living environments,” Hiranandani said.
However, he also noted challenges, such as rising input costs in steel and cement, and potential delays due to supply chain disruptions, which could impact project timelines and pricing.
The finance ministry’s review also noted the strengthening demand for office spaces. Citing a report by real estate consultant Cushman & Wakefield, the review said, “Gross leasing of office space rose 66% to 24.8 million square feet across the top eight cities in Q2 of FY25 Y-o-Y, marking the second-highest quarterly leasing volume in the sector’s history. Consequently, the vacancy rate in these cities dropped to 17.1% in Q2 of FY25, the lowest in 14 quarters. The report projects that gross leasing of office space in these cities will likely surpass 80 million square feet this year, breaking the previous record of 74.5 million square feet in 2023.”
Real estate major DLF recently announced their Q2FY25 results, revealing a robust outlook for both its residential and commercial segments.
In the residential sector, DLF noted, “New sales bookings during the quarter were down to ₹692 crore, reflecting delays in receiving approvals for new product launches. However, approvals for our super-luxury project ‘The Dahlias’ in DLF 5, Gurugram, were granted early in the current quarter. New sales bookings for the first half of the fiscal stand at Rs 7,094 crore, and we remain on track to meet our guidance for the full fiscal.”
DLF Cyber City Developers Limited (DCCDL) also saw strong results in commercial business, posting consolidated revenue of ₹1,653 crore in Q2FY25, a 13% y-o-y increase. Profit for the quarter stood at ₹521 crore, up 25% from Q2FY24. “Our rental business is experiencing steady growth. Encouraged by these trends, we have accelerated our capital expenditure to expand our rental portfolio, including new phases of Downtown Chennai and Downtown Gurugram, totaling approximately 11 million square feet,” DLF reported.