The sale of mid-segment homes in India has overtaken affordable ones in the first half of calendar year (CY) 2023, a report released on Tuesday showed. It is despite the increase in residential prices in all the major cities in India. The share of premium homes has also gone up during the period.
According to India Real Estate-Residential and Office Market January-June 2023 report released by property consultancy Knight Frank, the share of mid-segment homes has jumped from 35 per cent in the first half of 2022 to 38 per cent in the same period this year. At the same time, the share of affordable homes has fallen from 40 per cent to 32 per cent.
In the premium segment, the share has gone up from 25 per cent to 30 per cent.
In the report, the mid-segment homes are priced between Rs 50 lakh and Rs 1 crore. The affordable ones are priced below Rs 50 lakh, while premium homes are priced above Rs 1 crore.
The data in the report highlights that the sale of mid-segment and premium homes was at the highest level, at least since 2018. Between January and June this year, 59,563 units of mid-segment and 47,130 units of premium homes were sold. The numbers were 54,913 and 40,306 units in the same period last year, respectively.
Interestingly, since the first half of 2018, the sale of premium homes in India has gone up over 143 per cent from 19,329 units. In the same period, the sale of affordable homes has jumped 55 per cent from 38,352 units.
The jump in demand for costlier homes comes at a time when the prices of residential property are rising in India. In the last one year, the prices have gone up in the range of 2 to 10 per cent in various cities.
At 10 per cent, the highest jump in prices was noted in Hyderabad. It was followed by 6 per cent in Mumbai and 5 per cent in Bengaluru and National Capital Region (NCR). The lowest price rise was seen in Kolkata at 2 per cent.
However, the report also highlighted that even when the demand for mid and premium segments has gone up, the overall sales of residential homes fell in the first half of 2023, albeit marginally. This means the sale of affordable homes has actually gone down.
A total of 156,640 units were sold during the period as compared to 158,705 units in the same period in 2022.
It must be noted that in 2022, the demand for residential real estate in India was at a nine-year high.
"In 2022, residential real estate demand in India scaled a nine-year high, while the office market posted a robust recovery compared to markets in the developed world, which were still trying to find their feet. We are happy to convey that the real estate market has achieved levels close to those seen last year," said Shishir Baijal, chairman and managing director at Knight Frank.
Inventory rises due to jump in launches
According to the report, when the demand has fallen as compared to last year, the number of launches increased in the first half of 2023. During the period, 173,364 units were launched, the highest at least since 2018. It was 8 per cent higher than 160,806 units in the same period last year.
Owing to a fall in demand, the unsold inventory has gone up 7 per cent to 471,573 units during the period. The sharpest jump in the inventory was noted in Hyderabad at 54 per cent. It was followed by 35 per cent in Ahmedabad and 11 per cent in Chennai.
Notably, Bengaluru, Kolkata and Pune saw a dip in unsold inventory at 8 per cent, 3 per cent and 2 per cent, respectively.
Knight Frank, however, is optimistic owing to high demand.
"While the market is carrying more inventory, the consistently high sales volumes in H1CY23 have pushed down the quarter to sell (QTS) level from 7.8 to 6.7 quarters," it said in a report. QTS measures the number of quarters required to exhaust the unsold inventory.
Demand for office space robust
The data in the report highlighted that the Indian office market had showcased resilience in the backdrop of turbulent economic and geopolitical environments across the globe.
In the first half of 2023, the sale of office space was 3 per cent higher at 2.43 million square feet compared to the same period in 2022. It also comes when office rents have risen 2-10 per cent during the year.
Interestingly, while the demand for office space was up, the supply volume dropped sharply by 25 per cent to 1.67 million square feet in H1CY23.
It has led to a fall in vacant space in the Indian office market. As compared to 17 per cent in HICY22, the vacancy rate was 16.4 per cent in HICY23, data in the report showed.
"The strengthening economic fundamentals provide a solid foundation for the office market especially to the growth of India facing businesses which are expected to sustain demand throughout 2023," Baijal added.