How Far Will Home Prices Rise In 2022?

The pandemic has changed everything about how we function. It hasn’t left the real estate market alone either. The Indian real estate market was already going through turbulent times before the Covid-19 pandemic hit.

However, the pandemic put a real damper on home sales in India. The increased uncertainty of the first wave of Covid stopped people in their tracks when it came to large investments. Thus, the property market in India saw a significant slowdown 

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Since then, a lot of things have changed. Consumer sentiment and seller focus are two of the most significant things that have seen a massive change in the Indian real estate market. The variables in the real estate market like home loans, interest on home loans, stamp duty, and registration charges, were reduced significantly to drive consumer confidence in the biggest financial investment of their lives. 

By the end of the year 2020, banks had reduced charges and states had started offering heavy subsidies on the various property-related charges and taxes.

Recently, a survey that studied the high in-demand property types, sizes, budget ranges, and plots revealed that 56% of the respondents expect the prices for residential property to rise in 2022. The survey conducted by CII-ANAROCK polled over 5210 people across tier 1, tier 2, and tier 3 cities in India. The cause for this prediction was listed as the inflation in the prices of raw materials, machinery, and other construction materials. 

The survey also revealed that a rise of more than 10% in property prices has the potential to negatively impact consumer sentiment in the real estate market. Elaborating on the findings of this survey, an expert told LiveMint, “Votes favouring real estate as an asset class rose by 3% in this survey, from 54% in the H1 2021 edition to 57% in H2 2021. This is especially significant since housing prices are likely to rise by 5-8% in 2022 due to increased input cost pressure and supply chain issues. Hardening interest rates, which are very likely in the second half of 2022, will be another factor driving up the overall acquisition cost for homebuyers. 56% of respondent homebuyers are aware of this."

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However, the home pricing trends from international markets indicate otherwise.

Top economists in the USA have predicted that home prices will rise in the short term but will normalise by the end of the year.

However, the biggest shift in the Indian Real estate market, which won’t be conducive to the slowdown in the rising of property prices, is the foreign interest that India has accumulated in the past few years.

The discrepancy in the dollar to INR exchange rate has pushed a lot of multinational conglomerates as well as NRIs to make property investments in India. The subsequent rental income, progressing infrastructure, and good capital gains on most thought-out property decisions have added to the interest NRIs have in buying property in India. 

In fact, these factors have already shown a significant effect on the real estate markets for various cities in India. Let’s look at the example of Mumbai.

According to Maharashtra's General Registrar, more than 5,553 residential units were registered in Mumbai in November. This was followed by 7582 registrations in the first three weeks of December. As a result, the total registrations of the financial capital of the country had passed the 1 Lakh mark in 2021 with only one week left for the year to end.

The last two-quarters of 2021 show record numbers for Mumbai every month. After pushing the registration bar by 1 Lakh in a year, Mumbai has officially hit a 10-year property peak.

Earlier last year, the Maharashtra government closed a reduced stamp duty window. Property buyers in Mumbai were originally deterred by this and the month right after this change was made, August, saw a slowdown in sales and registrations of property in the city. It pointed to a slowdown that was reaching the Mumbai real estate market.

Homebuyers got back into rhythm during the holiday season and the slowdown quickly was converted into record-breaking sales. The state exchequer reported over INR 900 Crore in revenue on stamp duty solely from the registrations in November and the first three weeks of December.

The Mumbai property incident is just an exaggerated version of the price trend that people are expecting in the Indian real estate market in the year 2022.

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