How do Elections Impact Investment in Real Estate India?
As India gears up for the 2024 general elections, the intricate dance between politics, the economy, and real estate takes centre stage. In the lead-up to the polls, there are invariably many discussions on policy changes, economic reforms, and their implications on various sectors, including real estate.
We bring you the current trends in the Indian real estate market and unravel the potential impact of the upcoming elections on infrastructure projects, construction, and policy decisions. If you are interested in buying, selling or investing in real estate properties in India in the next few months, stay with us as we share some valuable tips.
Current Real Estate India Trends
The recent data from Knight Frank India’s Q3 2023 report paints a picture of a resilient and evolving real estate sector. India’s leading eight residential markets have demonstrated substantial growth momentum, with a notable surge in demand. During this quarter, sales of 82,612 residential units marked a robust 12% year-on-year growth, reaching a six-year high in quarterly sales volumes.
Regional variations are evident, with Kolkata leading in growth at an impressive 105% year-on-year, while real estate in Gurgaon and the NCR stands out with a 27% growth in sales. Mumbai, the most expensive market, continues to command a premium price at Rs 7600/sq ft.
Segment-wise Growth:
The mid and high-end segments have spearheaded this growth, with properties priced over Rs 10 million experiencing a remarkable 39% year-on-year rise and the mid-segment (Rs 5 – 10 million) recording a solid 14% increase. However, the affordable segment, comprising homes priced below Rs 5 million, faced a 10% year-on-year decline in Q3 2023.
Dynamics of Supply and Demand
Developers have launched 85,549 new residential units in response to this heightened demand, indicating a 23% year-on-year growth. The market dynamics have shown a shift towards mid and premium price segments, with the current quarters-to-sale (QTS) level improving to 6.5 quarters, reflecting an encouraging demand dynamic in the residential real estate market.
Elections and Economic Impact:
Historically, elections in India have been associated with uncertainty, affecting investor confidence and economic policies. What are some of the changes that you can reasonably expect in the next year, during and after the elections?
Policy Changes and Reforms
Elections can change government policies and economic reforms. Political parties may introduce new initiatives or modify existing ones that directly or indirectly impact the real estate sector. For instance, regulations, taxation, and land-use policy changes can significantly influence property markets.
Investor Confidence
Elections often create uncertainty, affecting investor confidence. Investors, including those in the real estate sector, usually adopt a wait-and-watch approach until the election results are clear and the new government’s policy direction becomes apparent. This cautious stance can influence market dynamics in the coming months.
Government Spending
Election campaigns often involve promises of infrastructure development and other public spending initiatives. Implementing these projects can directly impact the real estate sector, especially if new construction, transportation networks, or urban development plans are part of the mandate.
Interest Rates and Monetary Policy
Changes in political leadership can influence the monetary policy stance of a country. Central banks adjust interest rates based on economic conditions and government priorities. Alterations in interest rates can impact borrowing costs for real estate transactions, affecting demand in the housing market.
Global Factors
The global economic environment plays a role. Elections may coincide with or be influenced by global trends that, in turn, impact the economy. For example, changes in international interest rates or economic conditions affect foreign direct investment in real estate.
Consumer Sentiment
Elections influence consumer sentiment, and this sentiment can affect the real estate market. Homebuyers and investors may not be inclined to make significant financial decisions until they understand the new government’s stability and direction.
It’s important to note that these correlations can vary depending on the specific context of each election, the political landscape, and the prevailing economic conditions.
Investors must remember that real estate markets are influenced by various factors beyond elections, including demographic trends, urbanization, and overall financial health. Analyzing the correlation between elections and the real estate sector in India would require a detailed examination of specific polls, policies, and market dynamics at the time.
Navigating Political Crossroads
As India stands on the brink of political change in the next year, the potential pause or changes in infrastructure projects, construction activities, and policy decisions present a unique opportunity for investors in real estate India. The current real estate trends also suggest a degree of resilience, with the market adapting to external factors.
At Save Max, we believe the strategic move is to act now, leveraging the stability and calm before the eventual post-election activities. Seizing this opportunity positions homebuyers and investors ahead of the curve, allowing them to navigate the evolving economic landscape with foresight, resilience, and the potential for substantial returns.
Real estate’s mantra is clear: Invest now and reap the rewards later.
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