In a recent report titled “India Real Estate Q3 2023,” released on October 4, it was revealed that quarterly sales in the high-end housing segment have surpassed those in the affordable housing sector for the first time. The report, published by real estate consultancy Knight Frank, highlighted significant trends in the Indian real estate market during the third quarter of 2023.
According to the report, properties with price tags exceeding Rs 1 crore experienced an impressive annual growth of 39 percent during Q3 CY2023. Meanwhile, the mid-segment, with prices ranging from Rs 50 lakh to Rs 1 crore, also saw a respectable rise of 14 percent year-on-year.
India’s major metropolitan areas, including Delhi NCR, Mumbai, Chennai, Bengaluru, Hyderabad, Kolkata, Pune, and Ahmedabad, collectively recorded sales of 82,612 residential units during the July-September 2023 quarter. This represented a 12 percent year-on-year growth, marking the third quarter of CY 2023 as a period with the highest quarterly sales volumes in the past six years.
Notably, the Indian office sector in these top eight cities experienced transactions amounting to 16.1 million square feet (msf), marking a significant 17 percent year-on-year growth during Q3.
The report also pointed out a shift in the housing segments. Sales of affordable housing units (those priced below Rs 50 lakh) dropped from 36 percent in the third quarter of 2022, with 26,831 units sold, to 29 percent in Q3 2023, with 24,143 units sold. Since 2018, year-to-date (YTD), the affordable housing segment has seen a decline of 26 percent, while properties above the Rs 1 crore mark have surged by 175 percent. This shift was attributed to increasing prices, higher home loan rates, and the lingering impacts of the pandemic on affordable housing demand.
Conversely, the mid and high-end categories of residential properties continued to see an increase in sales momentum during Q3 CY2023. Properties priced above Rs 1 crore witnessed a substantial annual rise of 39 percent, and the mid-segment, ranging from Rs 50 lakh to Rs 1 crore, recorded a 14 percent year-on-year increase during this period.
Breaking down the sales figures, a total of 28,642 units priced at Rs 1 crore or above were sold in Q3 CY 2023, closely followed by homes in the Rs 50 lakh to Rs 1 crore range, which saw 29,827 units sold. The affordable housing segment, representing homes priced below Rs 50 lakh, witnessed a year-on-year decline of 10 percent, with 24,143 units sold.
Vivek Rathi, National Director of Research at Knight Frank India, explained that the continuous increase in home loan rates has led to a 7 percent increase in the cost of a Rs 40-lakh home. This has created challenges for consumers in the affordable housing segment, with an effective EMI increase of 14 percent compared to the same quarter of the previous fiscal year. Bengaluru and Hyderabad were particularly impacted in the affordable housing sector.
However, despite growth in most markets, office demand in Bengaluru slowed down in Q3 CY2023. The city recorded a 59 percent year-on-year drop, with 2.1 msf of office space transactions during this period. Experts suggest that global economic uncertainties, including recessionary conditions in the US and European economies, may have contributed to this slowdown.
The report also highlighted that new office completions during Q3 CY2023 reached 11.5 msf across the eight major Indian cities. Hyderabad accounted for 46 percent of the new office space delivery, with 5.3 msf, followed by Bengaluru with 4 msf. Mumbai led in office rentals at Rs 113 per sq ft per month, while Kolkata saw the highest rental appreciation of 10 percent during the quarter.
Notably, global corporations have shown increased commitment to their India operations by setting up or expanding their Global Capability Centers (GCC) in the country. These transactions accounted for 44 percent of office transactions in India. Domestic corporations accounted for 37 percent of office transactions, representing 6 msf in Q3 CY 2023. Mumbai was the most active office market during this period, with 3.2 msf in transactions, making up 20 percent of the total transactions.