India’s housing market hit a 9year high in 2022

The year 2022 saw the demand for apartment in India increase by 34% reach a nine-year-high in a trend driven primarily by a post-pandemic need for security, increased savings and income disruption for middle- and higher-income groups, according to a new report.

The report says house sales stood at 312,666 units in 2022, adding that the growth was particularly noticeable in the higher-income segments. For comparison, the sales in 2021 stood at 2,32,903 units, according to the report. Also shows a significant uptick in the demand for office properties. India recorded a 36% year-on-year increase in office leasing activities in 2022, with a gross total of 51.6 million sq. ft.

Higher-income Residential Segments

While the need for security that was acutely felt during the pandemic triggered the demand for homes, the extremely low-interest rates and comparatively low property prices made the case for homebuying even stronger. The Reserve Bank of India raising policy rates by a cumulative 225 bps (basis points) in 2022, residential demand in the country has not only remained resilient but surged to a nine-year high in terms of annual sales in 2022.

2022 was also the first year since 2014 in which the volume of units launched has exceeded that of units sold, the report said, adding that a comparatively strong economic growth outlook also helped push up sales.

The report shows that sales in the under-Rs 5 million (Rs 50 lakh) ticket size price segment came down to 42 per cent in 2022 from 45 per cent in 2020.  In contrast, the share of annual sales in the Rs 5-10 million (Rs 50 lakh to Rs 1 crore) and more than Rs 10 million (over Rs 1 crore) ticket-size categories grew to 37 per cent from 35 per cent and to 21 per cent from 20 per cent over the same period.

Residential sales have been robust in 2022 despite a 4-7  per cent increase in house prices across all markets, the report said. Cities including Mumbai, the National Capital Region (NCR), Bengaluru, and Pune registered a rise of 7 per cent each, the report showed. Chennai and Hyderabad witnessed a significant increment of 6 per cent, while Kolkata and Ahmedabad saw a 4 per cent increase in prices. 

The report also indicated that sales were up despite the fact that the EMI-to-income ratio for households had declined across all cities in 2022. Used to measure a person’s ability to pay their mortgage, this is a ratio of the monthly instalment they pay (called Equated Monthly Instalment or EMI) against income. Here, a “decline” means that EMI now accounts for a higher share of income. 

The report cited the “225 bps repo rate hike and consequent increase in home loan rates along with higher residential prices” as reasons behind the decline in the EMI-to-income ratio.

“2022 also marks the first year since 2011 for affordability decline in year-on-year terms. However, all markets except Mumbai are recorded to be well below the threshold of comfortable affordability set at 50 per cent ratio, a level exceeding which banks rarely underwrite a mortgage,” it said.

Ahmedabad emerged as the most affordable housing market in the country with an affordability ratio of 22 per cent. It’s followed by Kolkata and Pune at 25 per cent, Chennai and Bengaluru at 27 per cent each, the NCR at 29 per cent, and Hyderabad at 30 per cent.