As general elections approach, the real estate sector typically calms down; there is a noted decrease in project launches, with investors often adopting a cautious ‘wait and see’ strategy. Yet, it’s crucial to recognize that end-users may remain largely unaffected, making home purchases at any time if they encounter a suitable project and an appealing deal.
When election results hang in uncertainty, a common phenomenon is that real estate investors tend to exercise caution, anticipating possible policy shifts. Experts indicate that during such times, both transactions and launches drop and investors are often swayed by market sentiment, share performance, and even the potential impact of exit polls on market dynamics.
Elections 2019: Effects on the Real Estate Market
In its inaugural term (2014), the government accelerated infrastructure innovations through considerable reforms like DeMo, RERA, and GST, and revising existing laws such as the Insolvency and Bankruptcy Code, and the Benami Transactions (Prohibition) Act. Initiatives like the 100 Smart Cities, Housing for All by 2022, Make in India, and AMRUT Cities were introduced. Experts suggest that the last five years (beginning in 2019) have seen these measures considerably influencing the real estate landscape.
Also, akin to the 2019 elections, activity in both primary and secondary markets diminished as potential buyers and investors preferred to sit tight. However, momentum usually picks up post-elections, with buyers consoled by the government’s ongoing commitment to developing new infrastructure.
It's notable that from 2016 to 2019, the residential real estate sector in India faced a significant slowdown. Policy reforms initiated between 2016 and 2017 induced major market disturbances, exemplified by the NBFC crisis triggered by the IL&FS situation in 2018, which shook the residential market deeply.
Anarock Research cites that trends indicate a peak in housing sales and new launches could occur in 2024.
Price Fluctuations Over the Past Three Elections
An analysis of pricing trends for the last three election cycles shows 2014 exhibiting stronger performance compared to 2019. Data from ANAROCK shows average prices in the top seven cities climbed over 6% in 2014, rising from Rs 4,895 per sq. ft. in 2013 to Rs 5,168 per sq. ft. In contrast, 2019 saw average yearly price increases of merely 1%, moving from Rs 5,551 per sq. ft. in 2018 to Rs 5,588 in 2019.
Homebuyers’ Perspectives
While many potential homebuyers may choose to postpone their purchases until elections conclude, analysts argue that end-users aren’t swayed as easily by such external factors. They usually act once they spot a fitting property.
Investors may adopt a watchful approach, but elections typically influence market sentiment more than they affect end-users. Therefore, if a buyer comes across a well-situated property with developed infrastructure, reasonable pricing, and solid fundamentals, they are likely to proceed with the purchase—election outcomes notwithstanding—experts assert.
Anuj Puri, Chairman of the ANAROCK Group, highlights that elections often catalyze buyers to transition from indecision to active buying positions.
While markets can be influenced where investors prevail and speculation is common, investors focused on aggressive property acquisitions may prefer to maintain a cautious stance, while average homebuyers base their decisions on personal needs. Experts suggest that an investor's current methods could be determined by overall market vibes or the perceived ‘feel good’ factor, performance metrics from capital markets, and whether the new administration emphasizes continued infrastructure development.
Builders are similarly affected during election cycles. An unnamed developer noted, "New launch announcements tend to fall due to approval delays linked to the code of conduct during elections. We can anticipate a number of launches across various categories, including mid-segment, affordable, and luxury, in the upcoming quarter."
Expectations From Election Results on Real Estate
In 2022, a healthy absorption-to-supply ratio of 1.02 climbed to 1.17 in Q1 2024. Data from Anarock shows that controlled releases and an uptick in sales—especially in high-end and luxury segments—have led to a drop in unsold inventory and a rise in prices.
Puri elaborated, "The residential real estate sector is likely to reach unprecedented heights in 2024, echoing homebuyers’ robust confidence in the market’s performance."
Will Launch Numbers Surge Post-2024 Elections?
In recent quarters, the residential real estate market in the top seven cities has broken multiple records. Previously, quarterly launches surpassed 80,000 units per quarter in 2022. Recently, launches climbed past the 1 lakh mark, achieving this in the preceding five quarters as well. Anarock’s research reveals that major developers have procured land for upcoming developments at a staggering rate, 125% higher than in 2021.
As of March 2024, unsold inventory stands at under 6 lakh units, with an inventory overhang of just 14 months—down from 21 months a year ago.
Types of Upcoming Launches: Mid, Top, or Affordable?
Mid-segment and luxury projects have dominated launches—collectively making up more than 55% of total supply. Interestingly, the luxury and ultra-luxury segments have seen a growth, constituting nearly 25% of the offering as of Q1 2024. "The upcoming launches will mainly focus on these higher-end segments," Puri explained.
Pradeep Kumar Aggarwal, founder and chairman of Signature Global (India) Limited, is optimistic, expressing that future launches will span across all segments.
Stability or Growth in Housing Prices?
With declining unsold inventory, sales outpacing supply, and rising input costs, it’s likely prices will see an upward trajectory. “Various cities have already experienced annual price hikes between 10% to 32%,” Puri noted.
Should Homebuyers Buy Now or Wait?
Unless homebuyers are specifically in search of premium products in desired locations or by preferred developers, the typical buyer ought to consider all available options thoughtfully and negotiate for the best deal to finalize their purchase.
Commercial Real Estate Impact
Projected GDP growth of $3.5 trillion to $7 trillion by 2030 remains intact despite changing conditions. Knight Frank India’s Chairman and Managing Director, Shishir Baijal, stated this steady economic growth enhances India’s attractiveness to multinational corporations and solidifies its role as a prominent center for establishing Global Capability Centers and manufacturing plants. This growth notably benefits the construction sector and elevates employability.
Affordable and Rental Housing
Addressing the drop in demand for affordable housing is a critical area of focus for Baijal regarding the incoming government. Sustaining low interest rates and fostering favorable conditions could drive this initiative. “We anticipate that the government will reevaluate affordable housing policies to provide more incentives for suppliers,” he shared with HT Digital.