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Residential Real Estate Market Takes a Pause: Sales Drop Amid High Prices and Seasonal Slowdown

1st Oct 2024

2 Min Min Read

Real Estate Market takes a pause

After a period of rapid growth spanning nearly three years post-pandemic, India's residential real estate market appears to be hitting a speed bump once again. India's residential real estate market, which had previously faced challenges like low demand, financial irregularities, and delayed deliveries leading up to 2020, has now registered a significant slowdown in home sales in the July-September 2024 quarter.

According to the latest data from Anarock Research, home sales in the top seven Indian markets fell by 11% year-on-year, with around 107,000 units sold in the third quarter. Compared to the previous quarter, sales also dropped by 11%, falling from approximately 120,300 units. This was the first decline in nearly four years, signaling a shift in momentum for the sector.

Regional Performance: The Decline in Major Markets

The decline in sales was witnessed across all major regions, with Hyderabad experiencing the most significant drop—falling by 16% compared to the previous quarter and a massive 22% year-on-year. The Hyderabad market, once the fastest-growing in India, saw its booming growth slow to a crawl. Similarly, Pune, which had been another hotspot in recent years, recorded a 17% year-on-year dip, along with a 10% decline sequentially.

The Mumbai Metropolitan Region (MMR), India's largest housing market, showed signs of strain as well, with a 13% sequential decline and a 6% year-on-year drop. Kolkata faced an even sharper decline, with sales plummeting by 25% compared to the same quarter last year and a 14% sequential decrease.

“All top cities individually recorded a dip in housing sales, indicating a widespread slowdown,” remarked Anuj Puri, Chairman of the Anarock Group. Additionally, the new housing supply also dropped by 19% year-on-year, with approximately 93,750 units launched in Q3 2024—down from 116,220 units during the corresponding period in 2023.

High Prices and Market Dynamics

One key factor driving the slowdown has been the rising home prices. Average residential prices across the top seven cities collectively surged by 23% in Q3 2024 compared to Q3 2023, with Hyderabad recording the highest increase of 32%, followed by Bengaluru and NCR at 29% each.

During this period, homes priced above Rs 1 crore emerged as the largest segment of the housing market, capturing a significant share of both demand and supply. The premium segment (priced between INR 80 lakh to INR 1.5 crore) followed, representing about 30% of the market's new supply. The mid-segment (priced between INR 40 lakh to INR 80 lakh) contributed 23%, while the affordable housing segment shrank to just 13%, its lowest share in a quarter.

Seasonal Factors and Future Outlook

The third quarter is traditionally a quieter period for real estate, and the monsoon season, coupled with increased prices, likely led to the dip in activity. However, with the festive season now kicking off, there is hope for an uptick in sales in the coming months. Experts like Anuj Puri anticipate that developer-driven promotions and discounts could provide a much-needed boost.

He stated “While some increase in activities is expected during the October-December festive quarter, growth may not be as steep as seen in the previous years. Residential prices seem to have peaked and are now gradually stabilizing across cities.”

As the market enters the festive period, developers are gearing up to launch new projects, hoping to capitalize on the seasonal cheer to drive demand. Puri added that many developers are likely to roll out offers and discounts to entice buyers, potentially creating opportunities for those looking to enter the market.

Despite the current slowdown, the Indian housing market remains a crucial indicator of economic health, and the industry's adaptability during the upcoming festive season will shed light on how resilient the market truly is.

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