Festive discounts to supercharge Indian real estate market: A promising 2024 ahead?

The real estate market in India is expected to see significant discounts and a boost in sales during the Diwali festive season, according to Colliers. The analysis suggests that the housing sector, which has been performing well throughout the year, is likely to receive a further uplift during the festive period, setting the stage for a stronger 2024.

Traditionally, the Indian residential real estate market is influenced by two key factors: market sentiment and the financial situation of prospective buyers. Festive periods have always been associated with increased housing activity, even during slower economic periods like the COVID-19 pandemic and NBFC sector lending crisis.

Festive real estate boost

Colliers India, in its latest assessment of the Indian real estate sector, notes that the fourth quarter of the year, particularly the period from October to December, sees developers and financial institutions offering festive deals. Developers typically provide discounts, flexible payment options, and reduced floor rise charges during this time, while financial institutions attract homebuyers with benefits like processing charge waivers and small reductions in interest rates.

This festive season acts as the final push for residential real estate activity in India, with a substantial number of annual residential units sold during this period. The industry consensus suggests that housing sales in 2023 are already close to 2022 levels, and the ongoing festive season is expected to result in a 20 to 30 per cent increase in sales compared to 2022.

Identity over rates

The impact of changes in the repo rate on home loan EMIs seems to have a lesser effect on aspirational buyers and overall home-buying behaviour in India. There is a low correlation between home loan disbursements and repo rate changes at the industry level. This indicates that the decision to buy a home is primarily driven by a sense of identity and belonging associated with home-ownership rather than short-term financial gains influenced by repo rate fluctuations.

Serious homebuyers are more likely to stretch their budgets to align their home purchase with their desired lifestyle and identity. Home buying is a long-term financial commitment influenced by current income, expected income growth, prevailing interest rates, and other factors.

While interest rate trends are cyclical, consumers understand that the impact of repo rate changes on EMIs evens out over the long tenure of a home loan. Homebuyers are more inclined to make adjustments in terms of location, construction stage, property size, developer preference, and amenities rather than rushing or delaying the purchase decision due to interest rate fluctuations.

During the peak years of the COVID-19 pandemic in 2020 and 2021, sentiment played a crucial role in keeping the residential segment afloat. To counter the pandemic's adverse impact on housing purchases, several state governments reduced stamp duty and registration charges. This reduction in one-time monetary outflows encouraged homebuyers to make purchases even during uncertain times.

Pandemic property trends

The second homes market also saw significant activity during the pandemic, driven by factors such as a focus on health and wellness, increased demand for spacious homes, and reduced transactional charges.

Circle rates and property guidance values, similar to registration charges, significantly influence the timing of property purchases for Indian buyers. Buyers tend to consider these regulatory changes, often occurring at the end of the calendar or fiscal year, when deciding to purchase a property.

The current festive season is expected to bring new property launches, discounts, partnerships between developers and home furnishing companies, convenient payment options, and targeted marketing campaigns. This festive atmosphere is likely to conclude 2023 on a positive note and set the stage for a robust real estate market in 2024.