The real estate market in India is undergoing a significant transformation, with Gulam Zia, Senior Executive Director at Knight Frank India, shedding light on the current pricing dynamics and sales trends. Zia emphasizes that the price hikes in markets such as Mumbai and the National Capital Region (NCR) are largely unjustified. While there is an expectation of moderation in prices for the upper-end market, the lower-end market is not anticipated to face substantial pricing issues.

According to Zia, “Pricing has been one of the problems that we are expecting to haunt the real estate sector, especially in the mid to upper end." He expresses concerns regarding the rapid price increases that have occurred over the past year and a half, noting that if developers continue to raise prices without acknowledging market realities, it could lead to significant repercussions. “The kind of numbers that we are always worried that if developers start jacking up their prices without really taking cognizance of the market realities, it will bounce back,” Zia cautions.

Sales Trends and Market Performance

The Q3 2024 report highlights a remarkable achievement in residential sales, marking the highest quarterly sales in a year with 87,108 units sold across various markets. However, there was a 7% dip in the NCR region. Zia notes, “This quarter almost saw 10% growth year-on-year in residential sales, and that number itself is going to be the best in the last 10 to 12 years.” This impressive figure indicates that the real estate sector is on a path to potentially break records previously set in 2012, when approximately 3.5 lakh apartments were sold across the top eight markets. This year, the industry is poised to either match or exceed that record.

Upper-end vs. Lower-end Market Dynamics

While sales have been robust, Zia points out that the mid to lower-end segments of the real estate market have struggled due to various factors, including significant distress in the lowest segment following the COVID-19 pandemic. Additionally, rising home loan interest rates have further dampened demand in this segment. On the supply side, developers have increasingly focused their efforts on the upper-end market, where margins and sales velocity are perceived to be more favorable.

As a result, many transactions are now concentrated in higher price brackets, often exceeding one crore, which raises concerns about accessibility for a broader range of buyers. Zia highlights that maintaining sales momentum is critical for developers, as affordability has become a pressing challenge.

Future Expectations and Initiatives

Looking ahead, Zia remains optimistic about the potential impact of government initiatives such as the Pradhan Mantri Awas Yojana 2.0. This program aims to reduce interest rates for the lower segment by 150 to 200 basis points, which could enhance transaction volumes in that market. Although the current overall market data does not yet reflect this shift, Zia believes that as the upper-end segment begins to cool down, the lower-end market may experience a resurgence.

Despite these anticipated shifts, Zia does not foresee the current momentum in the real estate market dissipating in the near future. He asserts, “While one segment is just starting to pick up, the overall market will remain strong for at least the next year or two.”

Conclusion

In summary, the Indian real estate market is at a crucial juncture, characterized by rising prices that may soon stabilize amid strong sales performance. As developers recalibrate their strategies in response to affordability concerns and government initiatives like the Pradhan Mantri Awas Yojana, the market's landscape is poised for change. Stakeholders are encouraged to stay informed and adapt to the evolving dynamics within the real estate sector.

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