Home sales have reached a new peak in 2023, where the top seven cities are known to have a 31% increase in prices. With the second half of FY25 remaining and price growth already at 23% higher, do you think it will exceed the 31% increase seen in 2023?
Prashant Thakur: A very fair question on everyone’s mind is that after the phenomenal event in terms of value as well as volume, what does the second half look like? If you talk about the first half of FY25, in terms of volume we are slightly down 2%, which means we have sold 2% fewer units compared to the same period last year. But thanks to a sharp increase in prices, in terms of value we are up 19% compared to the same period last year. Having said that, the kind of price appreciation we’re seeing in the seven major cities is phenomenal. Post Covid, the average increase is almost 59% to 60% and for a city like Hyderabad there is a 70% surge. What I mean is that although the run-up has been good, we are at a point where higher price increases can be a barrier for end users to come into the market and we have seen signs of stabilization during the festive season.
This festive season, compared to the last festive season, was not very good and we also saw an 11% drop in new launches in the first half. Having said that, there is a good pipeline that the majority of the 10 listed developers have announced. If we have some kind of check on further price appreciation, the momentum will continue and it won’t just be about prices that have gone up. Apartment sizes have also increased by 10% to 12% over the past three to four years. That made the ticket size bigger compared to the previous peak.
Please help us understand the anomaly you are currently seeing here as MMR appears to be the only region where the number of units sold in the first half of this fiscal has surpassed the first half of FY24; However, despite the maximum volume growth year-on-year, the average ticket size remained the same at about Rs 1.47 crore. Why is the lack of demand causing a general increase in prices?
Prashant Thakur: As I mentioned earlier, we have seen price appreciation of almost 50-60% in the top seven cities. Now, if you have to talk about MMR alone, from 2020 to now, we have seen a 53.6% price appreciation. In my opinion, the developer has been very wise in the kind that is very cautious about further price increases because further increases from here will eliminate the equation of affordability and where end users will begin to withdraw from the market. And what we found out during…We’re cut off with that line but keep saying what you said.
Prashant Thakur: Post-Covid we have seen a steep rise in prices and to answer the question why we haven’t seen an increase in ticket sizes in Mumbai, Mumbai itself has seen almost a 53% price appreciation post-Covid, that’s a steep rise and any further increase from here will disrupt the affordability equation for users last and what we have seen is that post covid 75% to 80% of home buyers are price conscious end users.
So, I will give credit to the developers that they have maintained the discipline by not pushing the price beyond the capabilities of the end user and that’s where the price has started to stabilize. I would not say that I expect any kind of price slowdown from here, but the stability will continue and that is a good sign for the momentum to continue during the second half of fy25.
What about the NCR region as it has experienced quite a strong jump in prices. We have seen DLF’s investment, Prestige Estate in NCR region. Any insight into what is becoming the new super hub for real estate players?
Prashant Thakur: NCR has experienced a price appreciation of almost 57% to 58% which is quite steep and the reason for this drastic increase is because for a long time, the NCR market was stagnant and there were very limited class brand developers. market. When a prominent developer like DLF comes out with extraordinary luxury and luxury, it is well received and we see a lot of price appreciation, thanks to good NRI and investor participation.
We have seen that all the boys down south like Sobha, Prestige are also launching their projects in the Delhi-NCR market. Considering the strategic location in the north, this market will continue to gain traction but there is a note of caution I will take that prices have appreciated significantly. During the third quarter of CY24, close to 6,000 units were launched in Gurgaon and none of the units were priced below Rs 3.5 crore. So, one can imagine that the core market of the affordability or budget segment has disappeared. A further increase in prices will harm the momentum going forward. We are seeing good participation from A-class and renowned developers with pan-India presence like Godrej, Prestige, Puravankara, are planning as a welcome change for a market like ncr which is dominated by local players.
What is the specific thing in Bangalore because in terms of percentage, that is where the massive rerating is. Is it mostly because in the last 10 years nothing happened and it started to rise? Or is this a new trend that has started there?
Prashant Thakur: In Bangalore, we have seen a lot of premiumization happening. People have budgeted and the good part is that they are renting offices which are also earning a lot and we are seeing a lot of GCCs being set up. That’s where the IT population and startups also come out and buy.
Bangalore in particular is a market that is usually in the range of Rs 85 lakh to 1 crore over a long period of time. With rising income levels and signs of a good number of GCCs set up, people go out and buy. There too we have seen an increase in prices. And the main reason for the increase in ticket size here is that people are opting for larger units.
Bangalore remains a healthy market. Even during COVID, we’re seeing a lot of traction here. Bangalore is the only city in India with an inventory overhang of less than 10 months. It stood in eight months. So that means the momentum we have even though the price is rising high. One of the reasons the Bangalore market is more resilient is because we have a good number of A-grade developers there who have a track record of on-time delivery and good delivery service. Plus the population base is also quite tech savvy, the risk of taking a good appetite and the population of the younger generation to go out and buy is quite high, enabling these millennials to exceed their budget because they have a longer runway for loan services.
