2023 Real Estate Industry Outlook | Dr. Niranjan Hiranandani
When it comes to the Indian real estate industry, Dr Niranjan Hiranandani is one of the brightest stars. Dr. Hiranandani is the Co-Founder and Managing Director of the Hiranandani Group of Companies and is a well-known name. He is also the Vice Chairman of the National Real Estate Development Council (NAREDCO), an apex body for real estate developers.
In an exclusive interview with Neha Wagle, Dr. Hiranandani talks about the Indian real estate sector’s growth and outlook. He is also the Vice Chairman of National Real Estate Development Council (NAREDCO). Edited excerpt:
The real estate sector in India is expected to reach US$ 1 trillion in market size by 2030. What predictions do you have for the real estate sector in 2023?
The growth of the industry even during Covid times has been extraordinary – more than 15 to 20 percent compounded per annum. So, the growth story in terms of reaching $1 trillion is not an issue. The quantum definitely will be reached.
However, there are challenges too. The first challenge is the credit availability and high cost of loans. The interest rate for individual retail home loans is increased from 6.5 percent to 8.2 percent. That’s a big challenge for a house buyer when he aims to do so. However, most of the people who are learned in this subject are not worried because home loans may be more expensive today but there will be fluctuating rates of interest. With time, it will be much lower and if we talk to HDFC, ICICI, or any other bank, almost 50 percent of the people who take 15 to 20-year loans, prepay in seven to eight years.
The state governments that are charging stamp duty have seen a 25 percent growth in terms of collections. So, the real estate story looks very positive – in 2022 it has grown tremendously and 2023 looks even better. I think all in all, we see positive growth in terms of the residential sector completely.
What are the key growth levers fuelling the demand in the sector?
Covid woke up a lot of people. They felt that they needed a place to stay, people had to stay at home and work from home, and children had to study from home, whether they were in school or college they were stuck in the house and were using the same home for work and schools. Can you imagine four people on a video conference trying to do different communications with the work-from-home and study-from-home situation was quite chaotic! People realized that they needed to increase the size of their homes if they could afford it and hence a large number of people upgraded the sizes and the quality of their homes.
They wanted a place that was a little better than what was before. They wanted more amenities for their home. They wanted to be close to retail, hospitals, schools, colleges, clubhouse facilities etc.
This took place the reverse of what people thought that demand will come down during Covid, it went up post-Covid and that is why the unsold stock which was almost 24 to 36 months stock country-wide has now come down to 12 to 18 months stock. That is a clear indication in the marketplace that with the growth story of sales as well as the reduced level of stock available for sale which is under construction. I think a combination of both these things has indicated to the marketplace that the market is growing and people want to continue to buy, of course, subject to their affordability.
Commercial real estate space is demonstrating a strong comeback in the recent past. What will drive the growth as well as sustainability for this segment?
Commercials (real estate) were a big question mark also because as people did work from home some people thought that the commercials would come down. There was a statement from a leader of a very large IT company saying that in the next couple of years, only 25 percent of the people will work from the office and the rest will work from home. However, eight-ten months later, the reverse became true. And now people are required to come back to the office.
My view personally is that as long as GDP grows beyond 6 percent per annum the requirement for commercial spaces will continue to grow. However, there will be changes. Some places will grow faster, some will grow slower. New opportunities for commercial spaces will come up, and obviously, the old spaces will be more affordable. In Mumbai earlier Nariman Point was considered the leader of the place. That shifted to Parel, then BKC, Powai, and now that shifted to Navi Mumbai, Panvel. This type of change will of course continue to be, but the growth of commercial real estate is also happening in a very strong way.
According to you, right now the market is the investor’s market or the end user’s market?
The actual user’s market is much stronger. However, the investors are also coming back. A lot of people are encashing from the stock markets – their profits coming into real estate to invest in a house. We are also getting NRIs to buy. The big difference in the NRI market is that NRIs are not going for the big houses. They are going for smaller homes and homes which can be rented out. So, the different market segments are coming up which are high-end luxury, mid-end and affordable.
Mumbai, NCR Delhi and Bangalore remain on the top when it comes to real estate investments. How do you see the investments pouring into the other major cities?
The Tier-1 cities are taking the lead – there is over 20 percent growth in the Tier-1 cities. Tier-2 and Tier-3 are also growing. Hyderabad has grown very well this year but if you look at it across the board, they are slower than the metropolitan towns. I think Tier-2 and Tier-3 are also growing but not at the pace at which Tier-1 are growing.
