The residential real estate market in India's leading cities presented a tale of two trends in 2023. According to the latest data from global property consultant Knight Frank India, housing sales witnessed a slight contraction, while property prices experienced significant upward momentum. This dynamic underscores a market that is recalibrating post-pandemic, with demand persisting but becoming more selective.
A Marginal Dip in Sales Volume Across Major Metros
The report, titled 'India Real Estate: Office and Residential,' reveals that annual housing sales in the top eight Indian cities registered a decline of 1% in 2023, totaling 329,317 units, compared to 332,540 units in the previous year. This marginal drop comes after two consecutive years of robust growth, suggesting a market consolidation phase.
The performance across cities was mixed. Hyderabad led the decline with a 15% year-on-year drop in sales, followed by Kolkata at 11%. The National Capital Region (NCR) and Chennai also saw reductions of 7% and 5%, respectively. In contrast, some markets demonstrated resilience and growth. Mumbai emerged as the top performer, recording a 10% increase in sales. Pune and Ahmedabad followed with growth rates of 8% and 3%.
Robust Price Appreciation Defies Sales Slowdown
While sales volume softened, the story for property prices was strikingly different. The average residential prices across these eight cities registered a strong increase, highlighting sustained underlying demand and rising input costs. On average, prices grew by a substantial 10% in 2023.
The price surge was most pronounced in Hyderabad, which saw the highest appreciation at 19% year-on-year. This is notable given the city's drop in sales volume, indicating a market where available inventory is commanding higher values. Bengaluru followed with a 14% increase in average prices. Other significant gainers included Ahmedabad (13%) and Mumbai (10%). This widespread price growth signals a firm market where developers have pricing power.
Market Inventory and Future Trajectory
The report also sheds light on the inventory overhang, which is the time required to sell the existing unsold stock at the current sales velocity. As of the end of 2023, the overall inventory overhang across the eight cities reduced to 20 months, down from 23 months a year earlier. This indicates a healthier absorption rate and tightening supply.
Mumbai maintained its position as the market with the lowest overhang at just 14 months, reflecting strong demand. On the other end of the spectrum, the National Capital Region (NCR) continued to have the highest overhang at 38 months, though this was an improvement from 45 months in 2022. Knight Frank analysts attribute the current market dynamics to a combination of factors, including rising interest rates, increased property prices, and a normalization of demand after the post-COVID surge.
Looking ahead, the firm maintains a cautiously optimistic outlook. The fundamental demand for homeownership remains strong, driven by demographic factors and a growing preference for larger, owned spaces. However, the pace of sales growth may moderate if prices continue to rise rapidly or if economic headwinds persist. The market's resilience in 2023, characterized by stable sales and firm prices, sets a foundation for a more mature and sustainable growth phase in the Indian residential sector.
