Stock Mumbai skyline city property
"Housing prices in some of the top cities in India - Delhi-NCR, MMR (Mumbai Metropolitan Region), Kolkata, Pune, Hyderabad, Chennai, Bengaluru and Ahmedabad - grew at 6 per cent year-on-year during July-September of 2022..." Image Credit: Atul Loke/The New York Times

Dubai: Is it time for Indian expats to consider buying another property back in India? Almost all the numbers available suggest that this could be so.

Consider the evidence: For an Indian expat in the UAE/Gulf, the rupee’s slide past 22 to a dirham (it had even briefly crossed 23 as well, in October) would sweeten any property deal they enter into. (The rupee’s drop has come to around 10 per cent this year, brought on by successive US interest rate hikes giving the dollar an extra push higher.) “The current sales momentum in the housing sector is likely to continue in the first quarter of 2023,” said Anuj Puri, Chairman of Anarock, the real estate consultancy. “Also, because just before the end of a financial year, people look to invest - and real estate forms a significant part of their investments.”

Developers too played it safe, coming back with new launches only if they believed the market can absorb the supply. “In 2023, we may see new launches to remain well under control across most top cities.

“Just as in 2022, developers remained cautious to launch new projects especially in markets where supply was already in abundance. This tremendously helped developers there to reduce their previous unsold stock.”

Which gives the property market more time to build up its comeback. There’s also a second factor in play for Indian expats - property values in India are finally picking themselves up after an extended lean spell during the first and second pandemic wave. As happened in the UAE, the luxury end of the property market was first to recover, most notably in Mumbai as Bollywood stars, Indian cricketers, industrialists and high net worth expats bought when prices had softened considerably in early- to mid-2020.

And now, property values are increasing at close to the current inflation rates in India - at 6.7 per cent in October against September’s 7.4 per cent.

The rupee-dirham factor
“As the Indian rupee hit record lows against the dollar, there are all sorts of knock-on effects. Buying real estate in India is now relatively accessible for NRIs earning abroad and keen to take advantage of those high returns.
“As a result, we are seeing a higher level of inquiries. This is particularly true for residential real estate, because factually the residential asset class has given always high appreciation and it has been a safer investment option, being a lot more mature in terms of coverage in different cities in India and flexibility in offering options for just about every budget."
“In current times when property prices are higher and the rupee is lower, from the NRI perspective the opportunity for arbitrage is significant.”

“Housing prices in some of the top cities in India - Delhi-NCR, MMR (Mumbai Metropolitan Region), Kolkata, Pune, Hyderabad, Chennai, Bengaluru and Ahmedabad - grew at 6 per cent year-on-year during July-September of 2022 amidst robust housing demand and quality launches by top developers,” said M.I. Sait, founder and Chairman of Maxpo.

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“With the festive period expected to continue till the end of this year, we can expect sales to be north-bound and the number of unsold inventories to decline as well. While there has been a rise in housing prices in line with the global inflationary trends, the market can expect prices to continue to rise owing to the robust demand.”

So, any asset that can help deliver at or above inflation is the choice of the moment. When it comes to Indian expats, that reset mode is going bigger on property and gold.

More of the same in 2023?

Launches of new residential units rose between 10-15% this Diwali over last year, with nearly 33,000-35,000 units to be launched across seven cities in the country. With the average size of a unit being 800 square feet, this would mean a good 26 million square feet to 28 of residential space got launched in just the period around the time of the festival.

- M. I. Sait of Maxpo

“Indian property has remained faithful to investor expectations through the many ups and downs in the last couple of years,” said Sait. “Expectations and upward momentum have shown to sustain themselves - and many experts do believe that it would continue like this in the coming year.”

The appetite for homeownership has remained undeterred since pandemic, with maximum sales being driven by the end-users. We saw this clearly in all the quarters of 2022, when despite the three successive rate hikes by the RBI we saw housing sales of nearly 88,230 units.

- Anuj Puri of Anarock
DLF Riverside, Vytilla
DLF intends to play it smart on what to push next - whether ready homes or go with offplan - depending on what the market cycle has in store for 2023. Image Credit: Supplied

Despite another rate hike

The Reserve Bank of India has just raised the base rate for a fifth time this year, to 6.25 per cent and pegging it to the highest level since August 2018. And its likely impact on property demand?

Puri of Anarock suggests some caution on the part of a likely buyer. “A lot will depend on how the home loan interest rates pan out over the next year,” he added. “In entire 2022, including the new rate announced this week, we have seen a hike of almost 225 bps in the repo rates by the RBI, which inevitably has increased interest rates.

“While so far, the impact of the rate hikes has been minimal but if the rates rise further, it may go on to impact sales.”

Can real demand overcome rate concerns?

Aakash Ohri is Group Executive Director and Chief Business Officer at DLF Home Developers. And he has his fingers crossed that the good vibes of 2022 can be extended.

In the past decade, we have built our strength of being able to offer ready-to-occupy homes. We will be keeping both the ready inventory and the under-construction units ready, and will take a call on which units to launch in the market and at which part of the cycle. The decision will be driven by opportunity and demand.

- Aakash Ohri, Group Executive Director and Chief Business Officer of DLF Home Developers

“The residential real estate has not only made a return but is likely to thrive in the coming year,” said Ohri. “Home sales in India's eight largest residential markets increased 40 per cent to 232,396 units in the first nine months of 2022.

“The general market prognosis for the real estate business is favourable. According to specific estimates, sales momentum has improved rapidly in 2022 as prospective homebuyers continue to favour larger houses, more extraordinary facilities, and attractive pricing, which will keep them engaged in closing transactions.”

How much have property values shifted across Indian cities in 2022?

  • In Bengaluru, the residential property prices appreciated 6% to Rs5,900-Rs6,100 per square feet.
  • Housing prices in Chennai increased marginally by 2% Rs5,500-Rs5,700 psf.
  • In Delhi-NCR, prices increased 5% from Rs 4,400-4,600 per square feet to Rs4,700-Rs4,900.
  • In Hyderabad, prices increased 4% to Rs6,100-Rs6,300 psf.
  • In Kolkata, values were up 3 per cent to Rs4,400-Rs4,600 psf.
  • Mumbai saw a 3% increase to Rs9,900-Rs10,100 psf
  • In Pune, prices shot up 7 per cent to Rs5,500-Rs5,700 psf by September 2022 from Rs5,100-Rs5,300 at the end of the 2021.
  • CREDIT: Maxpo