Real estate investors tend to become cautious during elections on account of possible policy changes. There are fewer new launches and transactions, say experts
During general elections, the real estate business tends to’slow’ down; there are few launches, and investors prefer to ‘wait and watch’. Having said that, end-users may not be immediately harmed because they may choose to buy a house when they discover the perfect project in the market and the greatest value for their budget.
When there is ambiguity around election outcomes, real estate investors become cautious and anticipate potential legislative changes. According to analysts, there are fewer transactions and new launches during the elections, and investors’ decisions may be influenced by market mood, share market performance, and even the impact of exit polls.
1. Elections 2019: Their Impact on the Real Estate Market
During its first term (2014), the government accelerated infrastructure development by implementing major policy overhauls such as DeMo, RERA, and GST, amending old Acts such as the Insolvency and Bankruptcy Code and the Benami Transactions (Prohibition) Act, and launching schemes such as 100 Smart Cities, Housing for All by 2022, Make in India, and AMRUT Cities. According to analysts, the last five years (beginning in 2019) have seen the overall impact of their implementation on the real estate market.
According to Anarock Research, there is enough evidence to suggest that house sales and new launches may peak again in 2024.
2. price patterns throughout the previous three elections.
Examining pricing patterns over the previous three election years reveals that 2014 was a stronger year than 2019. According to ANAROCK statistics, average prices in the top 7 cities increased by over 6% in 2014, rising from ₹4,895 per sq. ft. in 2013 to ₹5,168 per sq. ft. In 2019, average prices increased by only 1% yearly, from ₹5,551 per sq. ft. in 2018 to ₹5,588 in 2019.
Impact on Homebuyers
While it is true that many prospective homebuyers are waiting for the elections to be done before making a purchase, experts point out that end-users will be unaffected by any such element and would buy a home as soon as they discover a suitable product on the market.
“Only investors will wait and see. Elections alter market sentiment but have little impact on end users. So, if a buyer finds a property that is populated, infrastructure has been developed, the price is reasonable, and all of the essentials are in place, election or no election, he is obligated to acquire it, according to experts.
According to Anuj Puri, Chairman of the ANAROCK Group, elections frequently signal the end of fence-sitting and a confident move to ‘buy’ positions for homebuyers.
3. The elections may have an influence on markets if investors are in the majority and speculators dominate.
Investors who want to make ‘aggressive’ real estate purchases may prefer a ‘wait and watch’ strategy, but homeowners will continue to buy based on their needs. An investor’s decision right now may be influenced by market mood or the ‘feel good’ factor, capital market performance, and whether the new government’s focus on infrastructure development will continue, according to analysts.
Elections also have an influence on builders. “During elections, the quantity of fresh launch announcements is often decreased since permissions may not be received according to the code of behavior. Having said that, numerous projects in various categories, including mid-segment, inexpensive, and luxury, may be launched in the coming quarter, according to an unnamed developer.
4: How will the election results affect the real estate market?
A good absorption-to-supply ratio of 1.02 in 2022 rose to 1.17 in Q1 2024. According to statistics given by Anarock, regulated releases and increased sales, particularly in the high-end and luxury categories, have resulted in a decline in unsold inventories and a rise in pricing.
“The residential real estate industry is expected to reach a new peak in 2024. This also suggests that house purchasers are enthusiastic about the real estate market’s success,” Puri explained.
5. Will there be an increase in the number of new launches following the 2024 elections?
The residential real estate market in the top seven cities has already set a few benchmarks in recent quarters. Quarterly releases in these cities used to total more than 80,000 units every quarter in 2022. However, it surpassed the one lakh unit threshold last year, with releases exceeding one lakh units in each of the previous five quarters.
According to Anarock Research data, major developers have already secured property for future construction at a rate that is 125% higher than 2021.
As of March 2024, unsold inventory has been reduced to less than 6 lakh units, with an inventory overhang of only 14 months, down from 21 months a year earlier. In light of the foregoing, there is room for launches to grow across segments, as shown.
6: Will these new releases be in the mid, premium, or inexpensive segments?
Launches in the mid-segment and higher end have dominated, accounting for more than 55% of overall supply. It is also noteworthy that the percentage of luxury and ultra-luxury sectors is increasing, accounting for about 25% of total supply as of Q1 2024. “The new launches are mainly to be spread across these segments,” Puri stated.
Signatureglobal (India) Limited’s founder and chairman, Pradeep Kumar Aggarwal, believes that future releases will span all categories.
7: Will future house prices be constant or increase?
Reducing unsold inventory, sales surpassing supply, and growing input costs are the primary components that will likely push prices in the future. “We have already witnessed an annual price rise in the range of 10% to 32% across various cities,” Puri stated.
8: Should homebuyers make the decision to buy now or wait?
Unless purchasers are looking for a premium or high-end property in their favorite location, built by a favored builder, or with a specific layout, view, or orientation, the ordinary homebuyer should carefully assess the available alternatives and clinch the sale by bargaining for the best offer.
9. Impact on Commercial Real Estate
The country’s projected GDP growth of $3.5 trillion to $7 trillion by 2030 can be sustained without substantial changes in conditions. “This persistent economic progress would increase India’s attraction to multinational firms, cementing its position as a significant center for constructing multinational capability centers (GCC) and manufacturing plants. Such continued expansion would have a substantial influence on the construction sector and increase employment,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
10. Affordable and rental housing.
Baijal thought that the new administration would boost demand for affordable housing, which has been steadily declining. This can be accomplished by preserving favorable interest rates and other enabling conditions. “We hope that the government will take a closer look at demand for rental housing policy as well as provide more incentives to the supply side for affordable and rental housing,” he stated to HT Digital.
