2024 Real Estate: Rates to surge 15%, demand remains strong.

Post by: Dr. Amrinder Pal Singh

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In the face of global economic challenges such as inflation and rising capital costs, India's real estate market has exhibited remarkable resilience in the current year. Despite uncertainties in growth, the sector has reached unprecedented heights, showcasing an unexpected strength. Kanika Gupta Shori, Founder and COO of Square Yards, predicts a 10-15% increase in property rates for 2024, attributing this rise to escalating building material costs and a steady surge in home demand.

Shori notes that despite property price escalations in the current year, sales have remained robust, underscoring a strong inclination towards homeownership among potential buyers. This momentum is expected to persist into the upcoming year, fueled by developers' strong cash flow, an increase in new launches and house sales, buoyant homebuying sentiment, and consumers' steadfast pursuit of financial security.

Experts anticipate the resilience seen this year to continue in 2024, even in the face of rising rates. Average residential prices across the top seven cities witnessed an increase of 8-18% in Q3 2023 compared to Q3 2022, primarily due to higher construction raw material costs and an overall rise in demand. ANAROCK Research reports an 11% increase in average property prices across these cities, from ₹6,105 per sq. ft. in Q3 2022 to nearly ₹6,800 per sq. ft. in Q3 2023.

Anuj Puri, Chairman at ANAROCK Group, attributes the current trend to the security associated with owning physical assets during crises, coupled with a rising aversion to high-risk investments. He also points out that tenants are increasingly considering EMIs as SIPs to build non-volatile assets, encouraged by relatively cheaper home loan interest rates.

Looking ahead to 2024, the demand for affordable properties is expected to surge as more individuals seek homeownership over rental accommodations. Spacious 2BHK and 2BHK+ homes are anticipated to be particularly sought after. Despite potential property price corrections, consumer confidence in real estate as the optimal asset class is expected to remain unwavering.

Simultaneously, the luxury housing segment is expected to experience exceptional demand, driven by High Net Worth Individuals (HNIs) and Non-Resident Indians (NRIs) seeking larger and more sophisticated assets within India. Their preferences lean towards technology-integrated 3BHK, 3BHK+, and 4BHK homes featuring bespoke elements and extravagant amenities.

Tier-1 cities like Mumbai, Delhi, Noida, Bangalore, Hyderabad, Gurgaon, and Chennai are poised for a surge in residential demand, with the return of young professionals to offices driving residential developments around corporate hubs. Tier-2 cities such as Ahmedabad, Chandigarh, Indore, Sonipat, Varanasi, and Lucknow are also expected to witness a significant uptick in residential demand, offering alternatives to the congested metros with substantial infrastructural growth.

Moreover, the demand for commercial real estate is anticipated to match or surpass 2022 leasing records. Despite global geopolitical tensions and elevated inflation, the first three quarters of 2023 saw healthy leasing activity across major office markets. A Colliers report predicts continued momentum, with gross absorption expected to reach around 50 million sq ft, driven by diverse sectors and the solidification of flex spaces in occupiers' portfolios.

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