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NEW DELHI, India, Dec 3: In recent GDP data, India’s surging housing boom has been underscored, reinforcing expectations that the industry will remain a driving force for the country’s economy. The construction sector demonstrated exceptional growth, expanding by 13.3% in July-September compared to the previous year, a significant improvement from the 7.9% in the preceding quarter and marking its strongest performance in five quarters.
This robust performance contributed to India’s overall economic expansion, exceeding forecasts at 7.6%, positioning the nation as one of the world’s fastest-growing major economies. In contrast, Western economies grapple with challenges stemming from high-interest rates and energy prices, while China faces setbacks due to a debt crisis in its property sector.
The housing boom, long-awaited and now underway, has generated millions of jobs, signaling a recovery from approximately six years of economic downturn induced by debt and the pandemic. The construction sector gained momentum last year and has reached its stride this year, driven by escalating incomes, a pronounced housing shortage in major cities, and robust population growth.
India, with an urban housing shortage of around 19 million units in the previous year, anticipates this shortfall to double by 2030, according to government estimates. Sunil Sinha, an economist at India Ratings and Research, noted that the significant growth in construction has been a key contributor to economic expansion and is expected to play a similar role in the coming quarters.
Builders express optimism, with projections suggesting the housing boom could extend for two to three years, and some are even more bullish, foreseeing potential for four years of sustained growth. Sanjeev Jain, Managing Director at Parsvnath Developers, emphasized that India is in the early stages of a housing growth cycle.
The real estate market, especially in major cities like Mumbai, New Delhi, and Bangalore, has witnessed a remarkable surge. Home sales in these cities jumped 36% in the July-September quarter, exceeding 112,000 units, despite an 8%-18% price increase. Anarock’s data revealed a simultaneous 24% increase in new residential projects being launched.
Prashant Thakur, Head of Research at Anarock, highlighted that the surge in home sales is driven by first-time buyers, with nearly 80% of houses purchased by end-users. Additionally, there is substantial demand from existing homeowners seeking more spacious apartments.
Even in Mumbai, where interest rates have risen by approximately two percentage points, strong demand persists. Jayesh Rathod, Director of Guardian Real Estate Advisory, reported a remarkable increase, selling over 5,500 flats in Mumbai and its outskirts—a surge of more than 50% compared to the same period last year.
The housing demand is further supported by salary hikes in major sectors, including e-commerce, healthcare, retail, and logistics, which have consistently remained above 10% for the second consecutive year, as estimated by EY.
Home prices in India are expected to outpace consumer inflation next year, driven by higher earners acquiring newly built luxury residences in cities. This demand is not limited to major urban centers but has also gained traction in smaller cities in southern states like Tamil Nadu, Karnataka, and Prime Minister Narendra Modi’s home state of Gujarat. Construction companies note that increased incomes and rural-to-urban migration have spurred demand in these regions.
The government’s initiatives to enhance the availability of affordable housing through subsidies are further catalyzing construction activity in smaller towns and cities. As a result, shares in property companies have experienced a natural surge, with the Nifty realty index rising by approximately 67% year-to-date, outperforming the 12% gain of the blue-chip Nifty 50 index.
Prominent gainers in the property sector include Prestige Estates Projects, which surged by 120%, DLF, with a climb of 67%, and Godrej Properties, recording an impressive gain of 52%. These figures underscore the significant momentum and investor confidence in India’s flourishing real estate market.
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