Election 2024 Results: 10 Key Impacts on the Real Estate Sector You Should Know

Impact of Election 2024 on Real Estate Sector

Real estate investors tend to become cautious during elections due to potential policy changes, according to experts. The real estate sector typically 'slows' down during general elections, with fewer launches and investors adopting a 'wait and watch' approach. However, end-users may not be directly impacted as they may choose to purchase a house when they find the right project and the best deal that suits their budget.

Experts note that real estate investors generally become cautious when there is uncertainty surrounding election results and potential policy changes. There are fewer transactions and new launches during elections, and investors' decisions may be influenced by market sentiment, stock market performance, and the impact of exit polls.

Elections 2019: The Impact on the Real Estate Market

During its first term (2014), the government focused on infrastructure development and major policy reforms, including DeMo, RERA, GST, amendments to the Insolvency & Bankruptcy Code, and the Benami Transactions (Prohibition) Act. Initiatives like 100 Smart Cities, Housing for All by 2022, Make in India, and AMRUT Cities were also launched. The last five years have seen the overall impact of these implementations on the real estate sector.

During the 2019 elections, the primary and secondary markets slowed down as buyers and investors opted to wait and watch. Momentum picked up after the results, with buyers and investors reassured by the government's focus on new infrastructure. However, India's residential real estate sector experienced a major slowdown between 2016 and 2019 due to policy reforms and the NBFC crisis post-IL&FS issue in 2018, causing significant turmoil in the industry. Anarock Research suggests that 2024 may witness another peak in housing sales and new launches.

Price Trends Over the Last Three Elections

Analyzing price trends during the last three election years reveals that 2014 was better than 2019. ANAROCK data indicates that in 2014, average prices in the top 7 cities rose by over 6% annually, from ₹4,895 per sq. ft. in 2013 to ₹5,168 per sq. ft. in 2014. In contrast, average prices in 2019 rose by only 1% annually, from ₹5,551 per sq. ft. in 2018 to ₹5,588 per sq. ft. in 2019.

Impact on Homebuyers

While many prospective homebuyers wait for elections to conclude before making a purchase, experts believe end-users are not directly impacted and will buy a home when they find the right property. "Only investors will wait and watch. Elections impact market sentiment but do not affect end-users much. If a buyer finds a property with developed infrastructure and the right price, they will purchase it regardless of elections," experts say. For homebuyers, elections often mark the end of hesitation and a confident move to buy, according to Anuj Puri, Chairman of ANAROCK Group.

Markets with a majority of investors and a speculative element may feel the impact of elections more. Investors planning aggressive real estate decisions may prefer a 'wait and watch' approach, while homebuyers will continue to buy based on their needs. An investor's decision may be influenced by market sentiment, stock market performance, and the new government's focus on infrastructure development, experts suggest.

Builders are also impacted by elections. "New launch announcements often decrease during elections as approvals may be delayed due to the code of conduct. However, the next quarter may see several project launches across mid-segment, affordable, and luxury categories," said a developer who wished to remain anonymous.

How Will Election Results Shape the Real Estate Sector?

A healthy absorption to supply ratio of 1.02 in 2022 has increased to 1.17 in Q1 2024. Controlled launches and rising sales, especially in high-end and luxury segments, have reduced unsold inventory, resulting in price increases, according to Anarock data. "The residential real estate segment is likely to reach a new peak in 2024, indicating optimism among homebuyers about the market's performance," said Puri.

Will There Be a Surge in New Launches Post-Elections 2024?

The residential real estate market across the top 7 cities has set several benchmarks in recent quarters. Quarterly launches in these cities exceeded 80,000 units per quarter in 2022 and surpassed 1 lakh units last year, with each quarter recording over 1 lakh units consecutively for the last 5 quarters. Major developers have acquired 125% more land for future development compared to 2021, according to Anarock Research. Unsold inventory has dropped below 6 lakh units as of March 2024, with an inventory overhang of 14 months compared to 21 months a year ago. This indicates potential for increased launches across segments.

Will New Launches Be in the Mid-Segment, Luxury, or Affordable Segment?

Launches in the mid-segment and high-end categories have been dominant, accounting for more than 55% of the total supply. The share of luxury and ultra-luxury segments has also risen, representing nearly 25% of the total supply as of Q1 2024. "New launches are mainly expected to be spread across these segments," said Puri. Pradeep Kumar Aggarwal, founder and chairman of Signatureglobal (India) Limited, believes that future launches will span all segments.

Will Housing Prices Remain Stable or Increase Going Forward?

Decreasing unsold inventory, sales exceeding supply, and rising input costs are key factors likely to drive prices upward. "We have already witnessed annual price increases ranging from 10% to 32% across various cities," said Puri.

Should Homebuyers Buy Now or Wait?

Unless homebuyers are seeking a luxury or high-end product in a specific location from a preferred builder, the average homebuyer should carefully evaluate available options and negotiate for the best deal.

Impact on Commercial Real Estate

The anticipated GDP growth from $3.5 trillion to $7 trillion by 2030 can continue without significant changes in circumstances. "This sustained economic expansion will enhance India's appeal to global corporations, establishing it as a hub for Global Capability Centres (GCC) and manufacturing facilities. This ongoing growth will significantly impact the construction sector and improve employability," said Shishir Baijal, Chairman and Managing Director of Knight Frank India.

Affordable and Rental Housing

Baijal hopes the new government will create more demand for the affordable housing segment, which has experienced a persistent decline. This can be achieved by maintaining favorable interest rates and other enabling conditions. "We hope the government will focus on demand for rental housing policies and provide more incentives for affordable and rental housing," he told HT Digital.