Home sales growth to remain positive in FY24: Boman Irani

So far the outlook looks positive and the current trends point to a consistent increase in buyers’ interest in home-buying.

Increasing investment in infrastructure across cities is driving demand with millennials increasingly booking their own homes. For instance, in Mumbai, a nearly ₹300,000 crore investment in infrastructure across the city, including a new airport, and improvement of roads and highways, is driving home demand.

In FY23, around ₹350,000 crore worth of real estate assets were sold, this is nearly 25 per cent up over the value of sales made in FY22. And, over 100,000 additional homes were sold last fiscal over the previous year.

Many companies shifted their manufacturing bases out of China and some moved to India. They are taking up office space in India now, thereby driving demand. Warehousing demand is up and investments are pouring into segments like data centres too.

There has not been any immediate impact on real estate demand – either home buying or commercial. 

Affordable housing sales have done well in Tier-III and other smaller cities. But the catch is, in larger cities, the price bracket of ₹45 lakh for availing any benefits creates hindrance. The government should give required incentives and the definition of affordable housing should be based on the area of the home (60 square metres).

For instance, in Mumbai or Delhi, you cannot sell anything at ₹45 lakh. Perhaps, more suitable criteria would be defining them based on their size, around 60 square meters. This makes it more affordable and a builder-friendly option especially in larger cities. 

Developers are currently looking at better volumes and larger turnovers, and are very successful in not increasing the prices of apartments. Developers only pass on inflationary costs to customers which typically range from 6 to 8 per cent. 

Prior to the implementation of RERA, there were many instances of residential projects getting stuck for want of funding. But post RERA, such instances are down significantly. Even now banks, developers, buyers, and the Government are working to get many of these projects back on track. However, we as developers believe that some scale-down needs to happen across the board – from financial institutions and buyers - for such projects to restart. In Mumbai, some of the banks are coming up with alternative solutions to restart stalled projects.

The other factor is bank financing for developers. Land is a major cost for developers and bank financing is still not preferred there for a variety of reasons. Now, some developers opt for external funding – like raising money from capital markets or going for PEs. The risk is somewhat lower.

Only when a developer looks to leverage his own equity or resources toward the purchase of land, the risk factor creeps in.

So I believe banks and developers need to work out a model where financing for land can happen. This has to come sooner or later.