Green shoots emerging in real estate
These are really interesting times for the real estate industry. Over the past year, we’ve seen policy events in the form of demonetisation, GST, RERA, PMAY. These are high impact events, with potential to make structural, permanent changes to the real estate industry as we know it. While the narrative in the past several months has focussed on these events, what has probably gone unnoticed is the changing dynamics in consumer demand and the emergence of green shoots here. As context, prices in real estate for the last 2 years have been flattish and transactions have seen a steep fall. Recent data from Magicbricks suggests that consumer demand could be showing signs of revival. Our data suggests that there’s a 51% rise in the number of property seekers over the past 12 months, with the number of active property seekers going up from 3.4 lakh in July’16 to 5.3 lakh in June’17. Interestingly, it turns out that the numbers of NEW property seekers entering the market has swelled by 25% from 2Lac to 2.5Lac in this period.
The number of older property seekers have doubled from 1.4Lac to 2.8Lac. An older property seeker is defined as someone who has been in the market for over a month. It is indeed a sign of green shoots emerging if the number of new property seekers entering the market is going up in a significant manner. We fathom that the reason for the steep jump in older seekers is probably because consumers are taking longer to decide on buying a home and therefore, they are in the market for several months longer.
If we dive deeper, we notice that the highest demand has been in the 0-80 lakh budget segment. Interestingly, demand in this segment has also grown by a huge 73% over the last year followed by the mid-market and luxury segments whose growth has been lower at 28% and 13% respectively. If one looked at the data across cities, it turns out that the growth in property seekers is not uniform across all cities. Some cities like Hyderabad, Chennai, Kolkata and Mumbai are seeing a relatively better uptick in demand.
Steady completion of ongoing projects; introduction of consumer protection Acts such as RERA; continuous softening of home loan rates; the government’s thrust on affordable housing through PMAY and CLSS schemes and ongoing urbanisation, are some of the key drivers that are drawing more people towards home buying. The prospect of owning a home continues to draw interest from the Indian consumer.
Clearly, the number of transactions on the ground aren’t anywhere close to these numbers yet, but the increase in the number of property seekers is an encouraging sign for the industry. How well the industry is able to convert this increased demand into transactions, especially with the festival season drawing closer, will determine whether these green shoots actually translate into a more sustained revival.