At the beginning of 2024, as the Indian real estate stakeholders (self-styled industry experts within the realty media landscape) are yet again influence peddling their bullish narrative, the reality check by Track2Realty clearly finds that the sales growth post-Covid has neither been broad based nor democratic. Real estate is yet again emerging as a parking lot of big money post the pandemic, as visible with the off-take of luxury & super luxury despite the stagnant job growth and wage growth.
As one enters the densely populated Greater Noida West (Noida Extension in popular parlance), the skyscrapers of the extended suburb of once barren Noida could well resemble like the city is fast turning out to be New York. Yes, you heard it right! It’s not even Mumbai but New York or Manhattan, with swanky skyscrapers dotting the skylines.
It is a different story altogether that the imbalance in the earning of top professionals in the city and the skyrocketing property prices is getting wider. After all, a studio apartment of around 500 to 600 sq feet is advertised at a base price of INR 50 lakh (5 million) plus and the acquisition cost may go up to no less than 1 crore (INR10 million/$1,25,000).
But before one could rest the case with a sweeping statement saying “property is the best bet to wealth creation in this part of the world”, comes a reality check. Most of these properties (both residential as well as commercial) can’t fetch a capital appreciation of even inflation adjusted 6% CAGR. The rental returns are even gloomy, as an office space costing INR 50 lakh in the Gaur City Center doesn’t even have a rental taker of INR 10,000 per month.
And it is not just about one builder having messed up with what could be seen as a cream piece of plot. On the same stretch of road, a shop costing INR 30 lakh (3 million) with Galaxy Blue Sapphire could only attract a tenant offering INR 5,000 a month. And before an outside view could assume that this seems to be the case of a failed property market, the reality check also suggests that in terms of the properties exchanging hands of ownership, this is one of the most happening property markets of India. Most of the research reports have put high bet over this market, of late.
This is not just the story of one property market. The reality of Greater Noida West property market is symptomatic of the deeper malaise that has inflicted the Indian property market. Across the property markets of India, the phenomenal offtake of luxury and super luxury, while affordable housing looking for an answer, tells a different tale. The investors (both organized and retail) are back in the property market to park their money. The concentration of wealth up the value chain in an economy of hyper-inflation is today looking for avenues, as also reflected in the skyrocketing stock market and appreciating gold prices.
But the larger question at the beginning of 2024 is pretty disturbing for not only the future of Indian real estate but also the macro-economy of the country:
Is the growth of Indian real estate in sync with the job growth and wage growth
Who are demand drivers of luxury and super luxury?
Whether the top 5% of the demography driving property market is sustainable?
In the absence of end users for how long can the investors hold on the inflated inventory?
Aren’t we heading to a worse scenario than even China where the real estate asset building had been more democratic and broad based?
Why the real demand in affordable housing is still looking for an answer when the developers are laughing their way to the bank?
There are more questions than what anyone could probably answer at this point of time. But what could definitely be vouchsafed is the fact that it is hardly the top 5% of the demography that could afford a piece of property today, borrowed money or otherwise. And hence, the year ahead is not what could be termed as the bullish property market. Since the investors continue to park their money into real estate, it may not be a crash landing but the growth momentum is not sustainable in an economy where the real demand in affordable housing is not what attracts the money bags.
There are more luxury and super luxury launches in the market and the share of affordable housing is shrinking. Sales of homes costing up to INR 50 lakh dip 16% in the year gone by. This is when the overall sale of homes has been up by 5%. Doesn’t it sound like a market that has lost touch with the ground realities?
More importantly, are these signs of a sustainable property market? Well, your guess is as good as mine, even though the developers continue with their influence peddling the other way. Post the General Elections of 2024, there will be better clarity over the course of Indian real estate. But the Indian developers definitely need a reality check instead of influence peddling of a bullish housing market. As far as buyers are concerned, they neither have a voice nor purchase power left in the property market. Mind you! Investors are investors and not the end use buyers to sustain the momentum of buying swanky skyscrapers for long.
Ravi Sinha
#RaviTrack2Media
Ravi Sinha is a journalist with two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his expertise and he has immense insight into consumers’ psychograph in the property market. His core domain includes brand rating of Indian real estate with Track2Realty BrandXReport.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
Subscribe our YouTube Channel @ https://bit.ly/2tDugGl
