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In a notable market shift, the July-September quarter marked the first time in India where sales of premium homes exceeding Rs 1 crore surpassed those in the affordable segment below Rs 50 lakh, as reported by Knight Frank in its "India Real Estate Q3 2023" report. The sale of 82,612 units reached a six-year high, witnessing a 12% increase compared to the same quarter last year. The mid-income range, priced between Rs 50 lakh and Rs 1 crore, dominated with 29,827 units sold, constituting 36% of the market share. Meanwhile, the high-end segment above Rs 1 crore experienced a 39% quarter-on-quarter surge, reaching 28,642 units.
Bengaluru, Pune, and Mumbai collectively accounted for 60% of homes sold in the mid-income segment. In contrast, the premium segment saw significant growth, particularly in the National Capital Region (NCR), Mumbai, and Bengaluru. The affordable segment, however, faced challenges, with its market share dropping to 29%, down from 36% the previous year. Sales in this category declined by 3% to 9,930 units.
The noteworthy change in market dynamics, with a tilt toward higher-value properties, is attributed to elevated interest rates and rising prices, which impacted the affordable housing sector. Rising costs have not deterred higher-ticket-size homebuyers, while the affordable segment has struggled, prompting the need for interventions to boost demand and improve development viability.
The affordable housing segment's decline is evident, with its current market share significantly lower than the 54% recorded in 2018. The report underscores the potential long-term repercussions of a prolonged slowdown in the affordable sector on the real estate industry. The Reserve Bank of India's consecutive interest rate hikes, totalling 250 basis points since May 2022, have contributed to the inflationary environment, impacting home loan rates, currently around 9%, compared to the record low of 6.6% a year ago.
Sales data highlights that residences priced above Rs 1 crore recorded a remarkable 39% year-on-year growth, whereas the mid-income segment witnessed a 14% increase. In contrast, the affordable segment faced a 10% decline. Responding to the demand uptrend in the mid-income and premium segment, developers launched 85,549 new residential units in the September quarter, reflecting a 23% increase from the previous year.
As stakeholders evaluate strategies to revive the affordable segment, the real estate sector is at a crossroads, navigating challenges and opportunities in response to evolving market dynamics. The report serves as a vital snapshot of India's real estate landscape, prompting a reassessment of industry approaches to ensure sustainable growth and inclusivity.
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