Infra development to boost western region market

In spite of the consecutive interest rate hikes in the past one year, the real estate market in western region is witnessing a continued growth. Growing infrastructure developments in the region is one factor that is pushing the growth in the region. Construction Times finds out the overall market trends.

India's real estate market in the western region has seen tremendous growth in the post-pandemic scenario. While Mumbai market saw rise in sales in 2022-23 compared to the previous year, the markets of Pune and Ahmedabad are showing considerable growth in residential and commercial segments.

Mumbai market

The year 2022 saw a positive year for Mumbai Metropolitan Region (MMR) residential real estate market. The real estate market report by ANAROCK says, “With nearly 1.10 lakh units sold (comprising 30% share of total sales), MMR was the frontrunner amongst the top 7 cities in 2022. MMR witnessed yearly sales jump of 44% in 2022 and recorded decadal high housing sales during the year. Along with sales, the new launches in the region also witnessed robust growth (119%) on an annual basis. MMR registered new launches of around 1.25 lakh units in 2022, with one of the highest contribution of approx. 35% to the overall launches across the top 7 cities in India.”

On the budget segmentation front, mid-segment housing priced Rs 40-80 lakh was the most favoured price segment amongst developers in the current quarter as 29% of the new supply was launched in this price category.

This year, the affordable segment (<Rs 40 lakh) supply took a back seat and contributed only 25% in the overall MMR market new supply - which is 7% lower as compared to 2021. Average property prices increased by 7% in MMR compared to 2021, mainly due to the high demand and increase in prices of construction materials.

According to the ANAROCK report, the luxury and ultra-luxury segment supply together witnessed a 7% jump against the previous year - which was 17% in 2021 and reached to 24% in 2022, mostly due to the high redevelopment activity in south-central Mumbai areas including Bandra, Pali-hills and Juhu area. Developers acquired the iconic bungalows and buildings for redevelopment. Approx. 2,200 new units were launched in the >Rs 5 crore budget range which is 57% higher than the previous year.

As per the latest trends, registration of properties in the Mumbai municipal region in March 2023 recorded a total of 12,574 units (till 31st March afternoon), contributing over Rs 1,160 crore to the state revenues, according to the Maharashtra Government data, although, this represents a significant increase as compared to the previous month's figure of 9,684. As per property consultant Knight Frank, who analysed the data, this was the highest revenue collected since April 2022.

The robust registration figures come at a time when rising home loan interest rates are stretching household budgets, while a rise in property prices is also reducing home affordability.

With the Metro Line 2A from Dahisar to DN Nagar and Line 7 from Dahisar to Gundavali, Andheri (E) in the western suburbs that were operational in the beginning of the year have enhanced connectivity, improved ease of travelling and reduced travel time by more than half. Post the commencement of these metro lines, the Malad-Goregaon region in the western suburbs have become the most preferred housing destination among home buyers in Mumbai.

According to a recent data analysed by Knight Frank India, bulk of the sales registrations in February 2023 were for properties in Western suburbs of Mumbai city constituting 57% of the market share whereas bulk of the sales registrations in March 2023 was again for properties in western suburbs constituting 62% of the market share.

Ram Naik, Director, The Guardians Real Estate Advisory,

comments on the trend, "Despite the challenging economic environment, it is encouraging to see an increase in property registrations in the Mumbai municipal region this month. This is a significant improvement over the previous month, and its contribution to the state revenues is commendable. The upward trend in property registrations demonstrates the real estate industry's resilience in the face of adversity. The fact that this is the highest revenue collected since April 2022 demonstrates the region's pent-up demand for real estate. The rise in property prices and home loan interest rates has not deterred buyers, and the increase in registrations demonstrates their confidence in the real estate market. It's also a good sign for the region's overall economic growth. We hope that this trend continues and that more people can find their dream homes in Mumbai."

Manoj Patwal, Founder & MD, BetterServ Ventures Pvt. Ltd. 

is of the view, “Although there has been a sharp decline in the property registrations in March as compared to last year, Mumbai is continuously witnessing a robust demand and an impressive ascent in property registrations for the past few months. Given the current scenario of steep rise in property prices owing to several factors such as the increase in interest rates, stamp duty and raw materials prices; we have already started witnessing short-term repercussions on the overall housing demand. Going forward, if the Government takes the appropriate measures, we believe that the sales momentum can continue for the coming quarters, and reputed developers with a good track record will continue to dominate the market.”

Pritam Chivukula, Co-founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI,

says, "Mumbai has witnessed moderate growth in property registrations in the month of March despite the hike in interest rates and rise in the property prices. This signifies that the low interest rates have been the biggest factor in the resurgence for real estate demand since the pandemic. Therefore the sharp acceleration of interest rates in a short span of time have resulted in a short-term effect on the sentiment of homebuyers especially in the affordable sector. We request the State Government to step-in and lighten the homebuyer's load by reducing the stamp duty so that the demand sustains going forward."

Pune market

Pune residential market stood third in terms of both new launches and home sales across the top 7 cities - comprising total share of 18% and 16% respectively of overall Pan India numbers, according to the ANAROCK annual report. Approximately 64,300 launches and 57,100 home sales were recorded in Pune in the year 2022 - clocking a 1.6x growth rate in new supply and residential sales against 2021.

Compared to the first half of 2022, Pune saw a robust performance in H2 2022, recording 52% of the new launch activity and 54% of the city's home sales during this period. Increased interest rates by the RBI and the ready reckoner (RR) rates in Pune by 6.12%, Pimpri Chinchwad by 12.36% minimally impacted thehousing demand in the city because of the growing desire for homeownership among the homebuyers.

A closer look at the budget-wise residential supply of Pune indicates that despite registering a 7% YoY decline, around 50% of the launches were concentrated in the mid price segment ranging between Rs 40-80 lakh. The share of affordable segment remained almost stable at 21% with a marginal drop of 1% on YoY basis. The high-end residential launches saw an 8% rise in 2022 against 2021 due to the increasing demand for larger homes with better amenities from homebuyers. Launches in luxury and ultra-luxury segments remained stable at 4% and 1% in 2022 compared to 2021, according to the report.

Ahmedabad market

According to a Magicbricks report, the Ahmedabad residential real estate market is maintaining its growth momentum. “Considering both demand and supply, Bopal and SG Highway continue their dominance as Ahmedabad's top micro-markets. Excellent infrastructure, good connectivity, and increasing business and economic activities along this corridor have improved property rates of these localities besides generating large employment opportunities,” the report says. Localities in western and northern Ahmedabad such as Narol-Naroda Road, Chandkheda-Motera, Pahlad Nagar and Paldi-Ambavadi proved to be the hotspot for potential homebuyers due to the presence of multiple, affordable commercial and residential developments.

In the office market space, Ahmedabad recorded a gross leasing volume (GLV) of 0.25 msf in the first quarter of 2023, indicating an 18% growth from the previous quarter but a decline of 6% on y-o-y basis, according to a Cushman & Wakefield report. IT-BPM took a lead with 22% share of the total leasing activity, closely followed by BFSI and Professional Services at 20% share each. SBD area continues to be the most preferred office submarket in the city capturing majority of overall leasing activity, mainly in locations like Sindhu Bhavan Road, Thaltej, and Iskcon Ambli Road. The operationalization of Phase-I metro has increased accessibility to major submarkets like SBD and CBD from the old city. Further, with Phase-II Metro connecting GIFT City and Ahmedabad in the coming years, SBD markets will witness improved commercial activities.

In the retail market, in Q4 2022, Ahmedabad malls witnessed healthy leasing activity, mostly in the form of retail chum in the superior malls. Some average-grade malls recorded fresh space take-up. Leasing in superior malls is driven by fashion and accessories stores, according to the report.  

Positive outlook

The western region real estate market is poised to grow in the coming years owing to the various infrastructure connectivity projects taken up which will see a sea change in the development of the region. According to the ANAROCK report, despite all the challenges within the MMR property market including the Maharashtra political crisis, global headwinds and higher interest rates, the housing market in the region performed remarkably well in 2022. There was minimal impact of the increased interest rates and overall property costs in 2022 in the housing demand in MMR and this trend will continue to remain so in 2023 as well because it will still take some time for higher interest rates to fully impact residential demand.

Pune housing market is expected to remain robust in 2023 backed by rising consumer demand and growing investments in infrastructure projects by the Maharashtra government. With a strong pipeline of residential projects, there is an upsurge in the number of potential homebuyers from Pune as well as neighbouring city - Mumbai. The city will continue a strong thrust on mid-end and high-end ticket sized launches by developers as there is growing demand for spacious homes that focus on providing safety, security, convenience and a healthy lifestyle to the homebuyers.

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