Economic Survey 2022–2023: Buyer Outlook Changes Are Driving The Housing Sector’s Resilience
According to the survey, which uses data from PropTiger on home inventories, the inventory overhang decreased from 42 months in October to December of last year to 33 months this year. The Indian housing market may have appreciated in value for a variety of reasons. But the sector saw exceptional growth in 2022 due to a shift in consumer attitudes regarding immovable property in the post-pandemic era, according to the Economic Survey 2022-23.
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The Survey, presented by Finance Minister Nirmala Sitharaman on January 31, 2023, claims that the industry has had steady development this year, with sales and launches in the second quarter of FY23 surpassing those of Q2 FY20 prior to the pandemic.
This is true despite rising house loan interest rates and growing real estate costs.
“The epidemic caused a shift in individual homebuyers’ attitudes toward home ownership. According to the Survey written by Chief Economic Adviser (CEA) V Anantha Nageswaran. “With the loosening of limitations, there was an upsurge in interest in the residential housing industry. Particularly in the readily available and cheap segment.
The Survey claims that “the Russia-Ukraine conflict has further affected the supply chain, leading to price escalations of steel, cement, imported chemicals, finishing materials, or fuel, rising the overall construction cost and contributing to a jump in housing expenses.”
According to the Survey, which uses data from PropTiger, there has been a considerable decrease in inventory as a result of the strong sales momentum, with the overhang down to 33 months during Q3 FY23 from 42 months during the same period last year. According to the Survey, which uses data from PropTiger, the amount of unsold inventory was 8.5 lakh by the end of 2022, with 80% of the stocks still in various phases of construction.
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“The increase in sales in 2022 played a key role in reducing the burden of inventory for India’s real estate developers. As a result, inventory overhang has decreased to 33 months from 42 months in 2021. Based on the expected time builders would need to sell off the present unsold stock based on the current sales velocity. The PropTiger report, which was published in December 2022. Had stated that the inventory overhang was at its lowest level since 2020.
According to the survey, “the return of migrant workers to cities to work in construction sites leading to a significant decline in housing market inventory.” It also notes that the universalization of vaccination coverage also significantly contributes to the improvement of the housing market because without it. The migrant workforce would not have been able to return to build new homes. According to the Survey, the “release of pent-up demand” was reflected in the housing market as loan demand increased as well.
It claims that as a result, “housing inventories have decreased, prices are firming up, and new home development is accelerating. Stimulating several backward and forward connections that the construction sector is known to carry. The poll indicates that recent government initiatives, such as decreasing import duties on steel products, iron ore, or steel intermediates. Will reduce building costs and help to moderate the increase in home prices.
Economic Survey 2022, page 23: Important points
GDP expansion
In 2023–2024, India’s GDP is projected to expand by 6% to 6.8%. Depending on the direction of global economic and political developments. The prognosis is roughly comparable to the projections offered by multilateral organizations like the World Bank, IMF, ADB, and RBI.
In terms of PPP, India has the third-largest economy in the world. And in terms of market exchange rates, it is the fifth-largest. The Indian economy has almost “recouped” what was lost, “renewed” what had stalled, and “re-energized” what had slowed during the pandemic & since the conflict in Europe in FY23, as would be expected of a country of this size.
Privately consumed
According to the study, private consumption and capital formation played a major role in driving India’s economic growth in FY23. As evidenced by the dropping urban unemployment rate and the faster net registration in Employee Provident Fund. These factors also helped create jobs. Additionally, the second-largest immunization campaign in the world. Involving more than 2 billion doses, helped to improve consumer sentiment, which could extend the consumption upswing.
Affordable housing
The weighted average annual interest rate on home loans decreased from 8.6% during the period of January through March 2020 to 7.3% during the period of January through March 2022. Which is indicative of the high overall affordability in the residential real estate market during the post-pandemic period.
Affordable Housing Fund and alternative funding sources
Since its foundation, the National Housing Bank has distributed Rs 34,588 crore under the Affordable Housing Fund for 3.9 lakh residential units.
To guarantee smooth business as usual in the sector throughout the first and second waves of the pandemic, the NHB disbursed Rs 13,917 crore & Rs 8,112 crore under the Special Liquidity Facility of the RBI. Since the start of the epidemic, the NBH has also offered Rs 88,400 crore in liquidity support through a variety of refinance programmes.
PMAY CLSS
Under the Pradhan Mantri Awas Yojana-Credit Linked Subsidy Scheme-Urban. The government has released a subsidy worth Rs 53,548 crore that will provide interest subvention to approximately 22,87 lakh households.
RERA
In the entire nation, more than 1.06 lakh complaints have been resolved by real estate regulatory authorities. The RERA law encourages additional investments in the sector with 99,262 projects & 71,514 agents currently registered.
Moratorium
The RBI’s approval of an infusion of Rs 75,000 crore for NBFCs, HFCs, and MFIs and its authority to lending institutions to offer a total moratorium of 6 months in the event of payment failure due between March 1, 2020, and August 31, 2020 have both helped to revive the real estate sector.
Real estate transparency
According to JLL’s 2022 Global Real Estate Transparency Index. Which is included in the Survey, India’s real estate market transparency is one of the top 10 most improved markets globally. With its composite transparency score rising from 2.82 in 2020 to 2.73 in 2022. Increased institutional investment as well as the rise in Real Estate Investment Trusts are the main drivers of this trend (REITs).
Priorities tiny cities
A pent-up demand in the residential real estate markets in Tier-II and Tier-III cities has resulted from first-time home purchasers being enticed to leave traditional metro areas by the hybrid work mode that allows them to work from anywhere.
Interest rate (home loan)
Borrowing costs may continue to be “higher for longer” as a result of entrenched inflation, which might extend the tightening cycle.
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