Demand For Premium Homes Propels Residential Sales To 11-Year High, Affordable Housing Falls Behind

India's residential real estate market has maintained its strong performance, with sales across top eight cities reaching an 11-year high in the first half of 2024.

A recent report by real estate consultancy Knight Frank, titled "India Real Estate: Residential and Office", revealed that total sales in Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, the National Capital Region (NCR), Mumbai, and Pune rose to 173,241 units between January and June this year.

The 0.17 million units sold in H1 2024 represent a healthy 11 per cent year-on-year growth, marking the highest sales velocity in 11 years.

Mumbai remained the largest residential market with 47,259 units sold, followed by NCR with 28,998 units, and Bengaluru with 27,404 units. Together, these three cities accounted for 59 per cent of the total residential sales during the year, the Knight Frank report showed.

The report highlights a fascinating trend: much of the residential demand continues to be driven by the premium segment. Homes priced at Rs 1 crore (Rs 10 million) and above saw a significant rise in sales, accounting for a substantial 41 per cent of total sales across all eight markets in H1 2024.

Sales in this segment have grown by 51 per cent YoY and it has been the primary driver for overall sales growth during H1 2024, the report said.

NCR saw the highest volume of sales in the premium segment among the top eight cities, with 20,795 units sold. Mumbai and Bengaluru followed with 14,699 and 13,698 units sold, respectively.

In contrast, the affordable segment (homes priced at Rs 50 lakh and below) shrank to 27 per cent from 30 per cent a year ago. The report noted a worrying trend of deceleration in the sale of units priced under Rs 50 lakh, which has persisted for the past five half-yearly periods. This has been the only segment not to see any growth in an otherwise strong market.

Increasing prices, higher home loan rates, and the comparatively adverse impact of the Covid-19 pandemic on homebuyers in this segment continued to weigh on demand, the report noted.

Commenting on the residential sector performance for the year H1 2024, Gulam Zia, Senior Executive Director — Research, Advisory, Infrastructure, and Valuation, Knight Frank India said, “The growth in the residential is firmly anchored by the premium category. This premiumisation of the market is observed in demand as well as supply where the share of launches in the Rs 1 crore plus homes has seen a corresponding rise in the first half of the year."

"While we appreciate the rise in the premium sector, the corresponding decline in the lower price categories should be addressed to ensure that there is more inclusive growth of the market," he added.

Nevertheless, the optimistic economic outlook and interest rate scenario, with the possibility of rate cuts, provide further headroom for demand. With the basic fundamentals in place, the market looks well positioned to exceed the sales volumes of 2023 as it heads towards the festive season in H2 2024.