India's real estate sector has shown remarkable recovery despite pandemic-induced challenges, with sales surging and trust among homebuyers gradually reinstated. According to Knight Frank data, housing sales in major cities reached a six-year high in July-September, marking a resurgence for developers who had faced setbacks due to delayed projects and fraudulent practices.
However, recent reports indicate a significant uptick in inventory levels. The first half of the current financial year saw a 28 percent surge in realty inventory, pushing the combined value of unsold homes among leading listed companies to a record high exceeding Rs 1 lakh crore. While this volume represents 33 months of sales at the current rate, experts view this surge primarily as a result of new product launches, considering it an opportunity rather than a concern.
Despite the overall rise, certain regions in the country have witnessed a decline in unsold housing inventory. Tier 1 cities saw a drop in unsold units, indicating a strategic shift among developers to prioritize the sale of older inventory while reducing new project launches.
Vivek Rathi, Knight Frank India's national research director, notes that the current inventory levels, although at a high, indicate projects being sold before completion, fostering developer confidence. Additionally, the gross sales of leading listed developers have substantially increased over recent years, depicting a positive trajectory for the market.
While high inventory levels can be advantageous during periods of strong consumer demand, experts caution about risks during excess supply scenarios. Extended time on the market can escalate holding costs for developers and property owners, especially if projects are based on optimistic demand projections.
Despite these considerations, the real estate market in India has shown significant improvement, particularly in luxury segments across various cities. However, the affordable and mid-price housing segments have experienced recent declines due to increased home loan interest rates, affecting affordability and buyer eligibility.
Looking ahead, experts emphasize the need for strategic investment approaches, highlighting potential investment avenues within related sectors like tile, plywood, or paint companies that can serve as proxies for real estate, offering steadier growth opportunities for risk-averse investors.
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