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More homeowners just started pulling cash out of their properties. Here's why.

suimt — Mon, 04 Nov 2024 17:22:34 +0000

An aerial view of existing homes near new homes under construction (UPPER R) in the Chatsworth neighborhood on September 08, 2023 in Los Angeles, California.

Mario Tama | Getty Images

U.S. homeowners are sitting on a record amount of equity, but higher interest rates over the past two years have made them reluctant to tap into it. That is finally starting to change.

In the third quarter of this year, mortgage holders withdrew $48 billion of home equity, according to ICE Mortgage Technology — the largest volume in the two years since the Federal Reserve started hiking its benchmark interest rate. While mortgage rates don’t exactly follow the Fed’s rate, home equity lines of credit, or HELOCs, are tied to it. The Fed cut its rate by a half percentage point in mid-September.

Despite the bump, homeowners are still being pretty cautious.

They are sitting on a little over $17 trillion in total equity collectively. Roughly $11 trillion of that is tappable, meaning homeowners could borrow on it as long as 20% equity would remain in the home, as most lenders require. The average homeowner now has $319,000 of equity in their home, of which $207,000 is tappable.

In the third quarter, homeowners withdrew just 0.42% of all tappable equity, less than half the rate seen in the decade leading up to the Fed hikes.

“Over the past 10 quarters homeowners have extracted $476B in equity, exactly half the extraction we’d expect to see under more normal circumstances. That equates to nearly a half a trillion untapped dollars that hasn’t flowed back through the broader economy,” said Andy Walden, ICE vice president of research and analysis, in a release.

Homeowners tend to use equity for home repairs, renovation projects and large expenses, such as college tuition.

Walden ran the numbers for the change in costs over the past two years: The monthly payment needed to take out $50,000 in a HELOC more than doubled from as low as $167 in March 2022 to $413 in January of this year. The latest rate cut reduced that slightly.

“The market’s currently pricing in another 1.5 percentage points of cuts through the end of next year. If that comes to fruition, and current spreads hold, it’ll have positive implications for both new equity lending as well as for consumers with existing HELOCs, with the payment on a $50,000 withdrawal falling back down below $300 per month,” Walden calculated.

That cost is still above the 20-year average, but it represents a more than 25% reduction from recent highs, according to the calculations.

“Given borrowers’ recent sensitivity to even slight rate drops, this could serve to entice additional HELOC utilization, especially with mortgage holders sitting on record stockpiles of equity and locked into their current home values via low first lien rates,” Walden added.

Home equity growth has been moderating recently, as home prices ease. More supply is coming on the market, and primary mortgage rates are higher than they were over the summer. That gives sellers less pricing power.

Foreign buyers eye Japan's empty houses with millions available for cheap — but experts warn of risks

Aseem — Mon, 04 Nov 2024 03:18:14 +0000

There are 9 million “akiyas” — empty houses — across Japan, according to official government data as of 2023.

You2u | Istock | Getty Images

Buying a home can feel like an impossible feat as large parts of the world face a housing shortage. This is not the case with Japan though, which is dealing with an oversupply of properties.

As of 2023, Japan had more than 9 million “akiyas” — empty houses — according to government data, with some of these properties going for less than $10,000.

These homes, often abandoned and left empty for decades, are scattered across rural areas and big cities, offering a unique opportunity for buyers with creative ideas.

record low of 1.2 births per woman as of 2023. Meanwhile, death rates have surpassed birth rates in Japan, as its elderly population continues to increase.

“The akiya problem has been building for decades, rooted in Japan’s post-war economic boom, which led to a surge in housing construction,” Tetsuya Kaneko, head of research and consultancy at Savills Japan told CNBC Make It.

“The issue became more pronounced in the 1990s with Japan’s economic slowdown, and has worsened with ongoing demographic changes,” said Kaneko.

Urban migration is another big contributing factor to Japan’s abandoned houses. “As younger generations move to cities for work, rural areas are left with aging populations who may pass away or be unable to maintain their homes,” he added.

Among local people, akiyas are often stigmatized, and even seen as a “burden,” said Kaneko. So, even when family homes are inherited by the children of elderly parents who pass away, many times, the heirs are reluctant to personally use or sell the property, adding more abandoned houses to the market.

Notably, a home that is over 30-year-old “is typically considered old,” said Kaneko, and locals tend to be concerned over things like safety issues, high renovation costs and decay, he explained. Some people even associate these homes with superstition, “believing they might be haunted or bring bad luck.”

Ultimately, “many Japanese [people] look at akiya as depreciating items that are more trouble than they’re worth,” Michael, founder of Japan real estate blog Cheap Houses Japan, told CNBC Make It.

“The cheapest properties are that way for a reason,” he said, whether it is because the location is not desirable, or the cost of renovations are expected to exceed the value of the property.

Anton Wormann. He fell in love with Japan after visiting it during a work trip. Born and raised in Sweden, the 32-year-old had traveled all over the world during his 20s working as a model before relocating to the Asian country in 2018.

“I lived in New York for about two years, and then I was basically all over Europe … so I know how expensive all of these metropolitans are,” Wormann told CNBC Make It. “There’s no way that I could buy a house in any of these places that I’ve ever lived in.”

When he discovered that Japan was selling homes for cheap, he decided to purchase one for himself. Six years later, Wormann owns seven akiyas, and works as a full-time content creator and real estate investor in Japan.

He has completed renovations on three of his properties, and is currently working on finishing up the other four renovations. Today, a property that cost him a total of about $110,000 to purchase and renovate, brings in $11,000 in short-term rental revenue per month.

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Senior Living, Kids-Centric Homes: The Emerging Real Estate Opportunities in Specialised Housing

suimt — Mon, 21 Oct 2024 12:50:48 +0000

Authored by Ankur Gupta:

India’s real estate sector is evolving beyond traditional residential projects, with two promising segments — senior living and kid-centric housing. These markets, driven by changing demographics and lifestyle needs, offer developers new opportunities and provide residents with homes designed for their specific life stages.

Senior Living Communities

The demand for senior living in India is steadily increasing as societal shifts occur. Longer life expectancy, higher income levels, and a changing approach to retirement living are reshaping housing needs for the elderly. The senior population in India is projected to grow substantially, with 17.3 million Indians expected to be over 60 years old by 2026, and this figure is likely to jump to 21% of the population by 2050, per a United Nations Population Fund report.

This burgeoning demographic is looking for homes that offer safety, healthcare, and a sense of community—key factors in post-retirement life. Developers who can create secure, well-maintained environments that meet these needs will likely capture a significant portion of this untapped market. The senior living market in India, currently valued at around USD 12 billion, has the potential to grow fivefold by 2030 (Colliers). This is particularly striking given that senior housing in India currently accounts for just a 1% penetration rate in the organized sector, far lower than the 6-7% rates seen in developed markets like the US and UK. This indicates a substantial demand-supply gap, and developers who act early can play a pivotal role in shaping this segment’s future.

One of the driving forces behind the rise of senior living communities is the shift toward nuclear families. With younger generations often moving to urban areas for work and leaving their elderly parents behind, there is an increasing need for independent living spaces that cater specifically to senior citizens. Traditionally, the idea of placing parents in retirement homes was culturally frowned upon in India, but this perception is changing as seniors themselves look for autonomy and a vibrant social life post-retirement.

Developers have the chance to redefine the retirement experience, creating communities that not only provide essential services but also promote an active, engaging lifestyle. Integrated healthcare facilities, recreational activities, and social interaction hubs will be essential to these developments. The real challenge lies in ensuring affordability while maintaining high standards of care and infrastructure.

Kid-Centric Housing

At the other end of the spectrum, the concept of kid-centric housing is gaining traction as families seek living environments designed to support their children’s development. This trend is largely driven by the rise of dual-income households, where parents need safe, stimulating environments for their children while they manage their professional lives.

In kid-centric homes, the focus goes beyond just child-friendly amenities. These residential spaces are designed to foster children’s learning and growth in a holistic manner. This could mean integrated sports complexes, learning hubs, or dedicated spaces for extracurricular activities like music, art, and dance. With more working parents able to invest in high-end amenities, developers are beginning to see the potential in creating housing that caters to both convenience and the holistic development of children.

While still relatively new in India, the concept is catching on quickly. Kid-centric projects are being developed across cities like Pune, Bengaluru, and Noida by major players such as Gera Developments, Prestige Group, and Supertech. These homes are not only about meeting current housing needs but also offering an environment that supports the physical and intellectual growth of children, providing long-term value to families.

Merging Safety, Convenience, and Growth

Safety is a primary concern for parents when selecting housing, and kid-centric homes are designed with features like childproof switches, high balcony railings, and rounded furniture edges. However, it’s not just about physical safety; parents are also seeking environments where children can explore and grow without constant supervision. The convenience of having access to top-tier educational and recreational facilities within the residential complex offers peace of mind and encourages children’s all-around development.

From a developer’s perspective, there is a clear market for these homes, particularly as urbanization continues and families shift toward nuclear structures. This trend could become a major differentiator in an increasingly competitive real estate market, with more families willing to pay a premium for homes that cater to their children’s needs. Kid-centric housing could potentially see a 5-7% price premium over regular residential projects within the next few years, making it an attractive proposition for developers.

Both senior living and kid-centric housing represent new growth avenues for Indian real estate. While the senior living market is driven by a massive population that is looking for independence and security in their later years, the kid-centric housing market taps into the rising aspirations of young families looking for homes that are more than just living spaces.

(The author is joint managing director of Ashiana Housing)

The commercial real estate recovery is on, but the rebound may be uneven

suimt — Fri, 18 Oct 2024 11:00:01 +0000

A commercial building available for rent in Melville, New York, April 17, 2023.

Howard Schnapp | Newsday | Getty Images

The tide could be turning for commercial real estate.

The Federal Reserve began its interest rate cutting cycle in September, lowering the Fed funds rate for the first time since 2020 by 50 basis points, while hinting that more cuts are on the horizon. That could give interest rate-sensitive sectors such as commercial real estate long-awaited positive momentum.

Lower interest rates make debt cheaper, helping to accelerate deal flow in an industry where deal activity had stalled into the second quarter of 2024. The CRE market had been pressured in the years after the initial Covid shutdowns, ending a nearly 15-year bull run in the face of higher borrowing costs, weak tenant demand and increased property supply. As a result, property values and sales declined.

The Fed’s shift in policy is “the most notable green shoot” for the CRE market, Wells Fargo analysts wrote in a Sept. 3 research note. While lower rates are not a “magic bullet,” the easing of the Fed’s monetary policy “lays the groundwork for a commercial real estate recovery,” analysts wrote in a follow-up report in late September.

For higher dividend-paying stocks such as REITs, lower rates make these fixed-income investments more attractive for investors. But the primary impact of interest rate cuts is psychological, according to Alan Todd, head of commercial mortgage-backed security strategy at Bank of America.

“Once the Fed starts to cut, they’ll continue along that path,” which fosters a sense of stability, Todd said. As the market feels more comfortable, it will “incentivize borrowers to get off the sideline and start to transact.”

RentCafe. By the end of 2024, developers are set to complete more than 518,000 rental units.

The multifamily sector was a pandemic darling within CRE as rent growth hit double digits in 2021. But that growth rate has since slowed to around 1%.

Yet this increase in demand suggests a shift in consumer behavior, as “households are taking advantage of greater apartment availability, generous concessions and more manageable rent growth,” Wells Fargo said.

Among the factors pushing renters to multifamily is a lack of affordable single-family homes for entry level. This trend is underscored by the stark contrast between homeownership costs and rental expenses: The average monthly mortgage payment reached $2,248 during the second quarter, 31% higher than the average monthly apartment rent of $1,712, Wells Fargo said.

Multifamily is also benefiting from stabilizing vacancy rates. For the first time in over two years, vacancies didn’t rise during the second quarter, holding steady at 7.8%. This stabilization, combined with the 1.1% average increase in rent, indicates a healthier balance between supply and demand.

Looking ahead, the outlook for the multifamily sector remains positive.

Wells Fargo analysis suggested that “high homeownership costs should continue to support rent demand,” meaning that current trends favoring multifamily housing are likely to persist in the near term.

Housing Prices in Top-10 Cities Surge 88% in 5 Years, Gurugram Rate Jumps 160%

suimt — Mon, 14 Oct 2024 08:50:06 +0000

The average price of newly launched residential projects in India’s top 10 cities has surged by a staggering 88 per cent over the past five years, according to a report by real estate data analytics firm PropEquity released on Monday.

Gurugram witnessed the most dramatic price growth, with average prices catapulting by 160% from Rs 7,500 per sq ft in 2019 to Rs 19,500 per sq ft in 2024. In contrast, Mumbai experienced the lowest increase at 37%, with prices rising from Rs 25,820 per sq ft to Rs 35,500 per sq ft during the same period.

Following Gurugram in terms of price growth are Noida (146%), Bengaluru (98%), Hyderabad (81%), Chennai (80%), Pune (73%), Navi Mumbai (69%), Kolkata (68%), Thane (66%), and finally Mumbai.

The report analysed 15,000 new launch projects comprising apartments, floors, and villas across the top 10 cities: Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Thane, Navi Mumbai, Pune, Noida, and Gurugram.

“Real estate prices have escalated exponentially across all major cities in the last five years,” explains Samir Jasuja, Founder & CEO of PropEquity. “The massive infrastructure development, growing interest from NRIs, HNIs/UHNIs and stock market gainers looking to create wealth and generate income through real estate investment, rising homeownership sentiments and overall shift towards luxury/super luxury homes as a result of rising aspiration and affluence are the contributing factors for such a steep rise.”

Despite experiencing the lowest price increase, Mumbai remains the most expensive city with an average price of Rs 35,500 per sq ft. Gurugram follows at Rs 19,500 per sq ft, and Noida at Rs 16,000 per sq ft.

The data further reveals a significant shift in the affordability landscape. In 2019, only Mumbai boasted average new launch prices exceeding Rs 10,000 per sq ft. However, by 2024, all cities except Hyderabad, Chennai, and Kolkata crossed this threshold, highlighting the growing demand and shrinking affordability in India’s prime real estate markets.

What Real Estate Developers Say?

Shiwang Suraj, founder and director of Gurugram-based property consulting firm InfraMantra, said, “The housing market has seen remarkable growth over the past five years, with top cities experiencing an overall surge in prices. Gurugram leads the way with a staggering 160% increase, while Mumbai shows a steady rise of 37%. This trend reflects the strong demand from both investors and homebuyers, highlighting the attractiveness of these urban centers.”

While there are discussions about the investor-driven nature of the market, this growth also signals confidence in the real estate sector’s potential. As these cities evolve, there’s an opportunity for innovative solutions to ensure accessibility for homebuyers, fostering a vibrant and diverse housing landscape, he added.

Stating that Gurugram has today risen to become one of the costliest real estate markets in India, Sanju Bhadana, MD of 4S Developers, said, “The city has been setting benchmarks in luxury and super luxury homes and is among the few cities that have seen price of homes double in the last 5 years. Post-pandemic, the Gurugram market has seen price escalation in all its micro-markets as demand swelled up from not just local inhabitants but also wealthy individuals from other parts of India and world. The coming years is expected to see a similar trend.”

Srinivasan Gopalan, CEO of Arisinfra Solutions Ltd, said, “In Q3, the real estate market faced challenges due to delayed project launches, the monsoon season, and the Shraad period, leading to a supply-demand imbalance. Despite this, strong demand from end users has driven a noticeable increase in sales from serious buyers. This upward momentum is anticipated to persist as the real estate sector continues to grow, fuelled by rising corporate activity and an increasing need for quality housing.”

Significantly, there has been a shift in the market, with luxury and mid-segment homes priced at INR 3 crore and above seeing significant quarter-on-quarter sales growth. New supply fell below one lakh units for the first time since Q1 2023, while Q3 2024 sales outpaced launches, a highly positive sign, Gopalan added.

Real Estate Developers Expect Housing Demand Pick-Up this Festive Season, to Roll Out Attractive Offers

suimt — Sat, 12 Oct 2024 10:46:11 +0000

As the festive season graces India, the real estate market is poised for its traditional surge, fuelled by developer incentives and strong economic indicators. This year, a confluence of factors, including evolving buyer preferences and robust infrastructure development, is driving growth, particularly in emerging luxury hotspots like Gurugram.

CBRE’s Festive Season Residential Outlook 2024 predicts continued growth, building on the strong sales performance witnessed throughout 2023 and the first nine months of 2024. Developers are preparing a range of attractive offers for homebuyers, including EMI waivers, GST exemptions, and complimentary add-ons like modular kitchens and furnished apartments. Some developers are even partnering with banks to offer fixed interest rates for specified periods, further sweetening the deal.

“Building on the strong sales performance throughout 2023 and the Jan-Sep 2024 period, the housing market remains well-positioned for continued growth as we approach the festive season,” says Anshuman Magazine, Chairman & CEO (India, South-East Asia, Middle East & Africa) of CBRE. “Traditionally, this time of the year is considered auspicious for home purchases, hence the sector will witness a surge in demand, particularly from previously hesitant first-time homebuyers.”

Gurugram, in particular, is attracting significant attention, emerging as a focal point for luxury real estate investments. Major infrastructure developments, coupled with a growing affluent population, are driving this trend. Knight Frank’s India Real Estate Report reveals a 12% year-on-year increase in property sales across the Delhi-NCR region in the first half of 2024, with Gurugram playing a significant role. Areas like Golf Course Road, Golf Course Extension Road, and Southern Peripheral Road (SPR) are highly sought after due to their excellent connectivity, commercial expansion, and luxury residential projects.

Aakash Ohri, Joint Managing Director and Chief Business Officer of DLF Homes, notes, “The Indian festive season has evolved into the annual high point for residential real estate. This auspicious time is seen as an ideal opportunity to invest in wealth-creating assets. The growing significance of homeownership, bolstered by consumer confidence in recent years, has notably stimulated housing demand.” He adds, “This year, the sector is poised to experience a substantial upsurge, particularly in the luxury segment, attracting HNIs and UHNIs, as well as significant investments from the NRI community.”

This demand for luxury is reflected in a report by Liases Foras, which shows that luxury property prices in Gurugram increased by an average of 8% in the first half of 2024. Prime areas like Golf Course Extension Road and Dwarka Expressway are outpacing the national average in price appreciation, solidifying their status as prime investment hotspots.

Vineet Dawar, Senior Vice President of Sales & Strategy at Elan Group, echoes this sentiment, stating, “With market sentiment already strong, we anticipate that the festive season will further accelerate the real estate sector’s growth. Both the residential and commercial segments are seeing promising buyer interest, particularly in key areas of the Delhi-NCR such as Dwarka Expressway and SPR road.”

Gurugram’s success is intrinsically linked to its continuous infrastructure improvements. The expansion of the Rapid Metro and the upgrade of SPR have significantly enhanced connectivity, attracting both residential and commercial interest. Savills India reports that commercial leasing in Gurugram grew by 18% in the first half of 2024, with SPR and Dwarka Expressway emerging as key growth corridors for IT parks, retail outlets, and office spaces.

Rahul Singla, Director of Mapsko Group, highlights a shift in buyer preferences, stating, “After the pandemic, there’s been a marked rise in demand for homes that offer more space and lifestyle features like work-from-home setups. We’re expecting strong interest in the mid-to-luxury market segments, as more buyers now prefer comfort, convenience, and enhanced living experiences.”

Mohit Malhotra, Founder and CEO of NEOLIV, adds, “As the festive season approaches, expectations for sales in Gurgaon’s real estate market are high. This period typically ignites increased buyer interest, driven by optimism and the desire to invest in new homes. Developers are expected to roll out attractive offers and along with the ongoing infrastructure improvements we can expect a good festive period.”

Beyond Gurugram, emerging markets like Sonipat and Panchkula are also witnessing increased real estate activity. Sonipat, benefiting from its proximity to Delhi and ongoing infrastructure projects like the KMP Expressway, is attracting both residential and industrial investment. Panchkula, close to Chandigarh, is seeing growing interest due to its strategic location and burgeoning IT and business hubs.

Impact of Loan Rates

Despite higher loan rates, homeownership remains a priority for many. RBI data shows a substantial 40% increase in home loan deployment, reflecting the resilience and confidence in the housing market. However, credit providers need to remain cautious to manage NPAs effectively.

In conclusion, the festive season is set to illuminate India’s real estate market, driven by a potent mix of developer incentives, evolving buyer preferences, and strong economic fundamentals. While Gurugram shines as a luxury hotspot, emerging markets are also presenting compelling investment opportunities. As the year progresses, the sector appears poised for sustained growth, fuelled by the enduring aspiration for homeownership and the allure of a prosperous future.

Zillow adds climate risk data to home listings as threats rise

suimt — Fri, 04 Oct 2024 19:29:20 +0000

Insured losses for Hurricane Helene are now estimated at over $6 billion, but the uninsured losses are far higher. That’s because the vast majority of homes impacted by the storm, especially in hard-hit North Carolina, did not have flood insurance.

New risk-assessment technology is designed to help change that for the future.

Most homeowners in North Carolina do not have flood insurance, because they are not in flood zones designated by the Federal Emergency Management Agency. Government-backed mortgages require flood insurance in those designated areas.

Just 4% of North Carolina homes are in a FEMA flood zone. But climate risk firm First Street, which incorporates the effects of climate change into its property risk scores, shows nearly 12% of homes in the state at flood risk.

First Street just launched a suite of climate risk data for every for-sale property listed on Zillow.

“Climate risks are now a critical factor in home buying decisions,” said Skylar Olsen, chief economist at Zillow, in a release. “We’re providing buyers and sellers with clear, property-specific climate data so they can make informed decisions. As concerns about flooding, extreme temperatures, and wildfires grow, this tool also helps agents inform their clients in discussing climate risk, insurance, and long-term affordability.”

A house along the Broad River in the aftermath of Hurricane Helene on October 1, 2024 in Bat Cave, North Carolina.

Sean Rayford | Getty Images

Each for-sale listing on Zillow now displays First Street risk scores for flood, fire, wind, air and heat. They also show those same risk percentages estimated 15 years and 30 years into the future — the standard lengths for fixed-rate mortgages.

On properties with some risk now, it often shows that risk rise over time, as First Street incorporates the effects of climate change. This is especially true for the flood risk, because climate change is already intensifying the severity of rainfall, even in minor storms.

The data also includes a recommendation as to whether the homeowner should have flood insurance and a link to the First Street site, which will help estimate insurance costs.

“A lot of people think that they are safe from flood if they’re not in a FEMA flood zone, and that’s decidedly not true. Heavy rainfall can affect many, many people across the country, and there’s no indication from the FEMA flood zone designation that that is a risk for you,” said Ed Kearns, chief science officer at First Street. “We’ve created these new flood maps that do bring that into account, that will allow consumers to make that informed choice about whether they need flood insurance.”

More than 80% of buyers now consider climate risk when purchasing a home, according to a survey by Zillow. Respondents ranked flood risk as their highest concern, followed by fire.

A Zillow analysis of August listings found that more homes nationwide had a major climate risk than did those listed for sale five years ago. That was true across all five climate risk categories, the analysis found. For new listings in August, 16.7% are at major wildfire risk and 12.8% show a major risk of flooding, according to Zillow and First Street data.

As more and more consumers consult these climate scores in their purchase decisions, the effect on home values will surely increase. The cost of insurance is already factored into home prices, and as both the cost and necessity of insurance rise, home values in the most affected areas will fall.

“I think that’s going to be the most direct impact of having scores on homes that quantify risk is that there may be some direct impact on real estate values, but a lot of that is going to go through the amount of insurance necessary to cover that home,” Kearns added.

Mortgage rates spike after stronger-than-expected jobs report

suimt — Fri, 04 Oct 2024 17:53:26 +0000

The average rate on the 30-year-fixed mortgage jumped 27 basis points Friday morning following the release of the government’s monthly employment report. The rate is now 6.53%, according to Mortgage News Daily.

That is 42 basis points higher than Sept. 17, the day before the Federal Reserve cut its benchmark rate by half a percentage point. Mortgage rates do not follow the Fed, but they loosely follow the yield on the 10-year U.S. Treasury.

For mortgage rates, it is all about what the expectation is next for the Fed. As such, there was a lot of anticipation leading up to this particular monthly report, since the last two pointed to weaker labor market conditions.

“Indeed, the Fed’s decision to cut by 0.50 vs 0.25 last month had much to do with the fear/expectation that reports like today’s would be in shorter supply going forward,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “The only salvation here would be the notion that this is just one jobs report in a recent run that’s been mostly weaker and that perhaps the next one won’t be so damning for bonds.”

However, the report does shift the outlook slightly for rates going forward, since most had assumed the trajectory would be lower.

“MBA’s forecast is for longer-term rates, including mortgage rates, to remain within a relatively narrow range over the next year,” the Mortgage Bankers Association’s chief economist, Michael Fratantoni, wrote after the jobs report was released. “This news will push mortgage rates to the top of that range, but we do expect that mortgage rates will stay close to 6% over the next 12 months.”

Today’s homebuyers are highly sensitive to rate moves, as house prices continue to rise from year-ago levels. There is also still very low inventory on the market, which has only served to keep prices higher. Rates are a full percentage point lower than they were a year ago, but the housing market has not seen much of a boost yet.

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NCR's Housing Launch Spurt: Scare or Opportunity?

suimt — Sun, 29 Sep 2024 10:58:45 +0000

The twin cities of Noida and Gurugram have done exceptionally well in terms of infrastructure development.

NCR remains the only market in the September quarter where new launches have exceeded sales.

Written by Sanju Bhadana:

The national capital region (NCR) has recorded a significant growth in new property launches in the past one year. This is attributed not just to the infrastructure developments that are happening around Delhi to ease commute and enhance attractiveness of corporates and tourist but also the rising aspirations and affluence of the middle class, growing number of HNIs/UHNIs, and not to forget the interest of NRIs, further upping its reputation in terms of the cosmopolitan culture.

According to PropEquity data for the September quarter of 2024, the new launches have risen 221% Y-o-Y and 29% Q-o-Q to 13,311 units. With this, NCR’s share in total new launches has risen to 14% from 4% a year ago thereby outperforming Bengaluru and Hyderabad at 12% each.

The new launches have gone up drastically from 4147 units in Q3 CY2023 to 7072 units in Q4 CY 2023, 11,948 units in Q1 CY 2024, 10,308 units in Q2 CY 2024 to 13311 units in Q3 CY 2024. NCR remains the only market in the September quarter where new launches have exceeded sales. In fact, NCR has seen launches exceed sales in every quarter of 2024. This, however, was not the case in 2023.

Infrastructure boom

The twin cities of Noida and Gurugram have done exceptionally well in terms of infrastructure development. From Dwarka Expressway that connects Delhi to Gurugram to Delhi-Mumbai industrial corridor and the soon-to-be-operational Noida International Airport, the NCR has witnessed a transformation like never before. The ever-expanding metro rail and high-speed rail networks have eased the commute-to-work culture from nearby cities thereby driving up the economy.

Irresistible proposition for developers & investors

The growing interest of NRIs and HNIs/UHNIs along with stock market gainers, startup founders and young millionaires in the region’s real estate have also played a huge factor in driving up the demand. The streamlining of regulatory challenges and policy uncertainties have also played a key role in increasing transparency. Not to forget the massive returns some of the micro markets have given post-covid have induced fence-sitters and those looking to further elevate their income to invest in second homes.

Noida is no longer considered a poor cousin of Gurugram. The city has taken to premiumisation in terms of both amenities and pricing of real estate properties. Owing to the soon-to-be-operational Noida international airport, the leasing activities in office and retail spaces have also gone up signalling a positive outlook and encouraging growth trends in the region.

The two regions also have a multiplier effect on the economy of Uttar Pradesh and Haryana. Delhi-NCR’s real estate market has attracted highest private equity investment of USD 633.3 million during January-June period of this year as investors look to encash high demand for prime office space and luxury housing, according to Cushman & Wakefield. The strategic location, burgeoning economy, and growing population make it an irresistible proposition for developers and investors alike.

Over 100% rise in price between 2021-24

The PropEquity data further highlights the sales pattern in NCR. Sales have grown 22% Y-o-Y and 3% Q-o-Q to 10,263 units gaining the distinction of being the only city to record growth in both new launches and sales! NCR’s share in total sales have also risen from 6.6% in Q3 CY 2023 to 10% in Q3 CY 2024.

The primary micro-markets like Golf Course Extension, SPR, Dwarka Expressway etc. in Gurugram and Noida Expressway, Noida extension and Central Noida in Noida have seen a huge growth in prices. Between July 2021 and July 2024, Dwarka Expressway and Golf Course Extension Road have seen weighted average price of new launches rise by 101% and 53%, respectively. Similarly, Noida expressway saw a rise of 165%.

Conclusion

With homebuyers gravitating towards these micro markets in NCR tells a lot about how big a role infrastructure development has played in the growth of real estate in this region. The spurt in new launches is an opportunity for homebuyers to choose the best real estate project that not just fulfils their lifestyle aspirations but also financial goals.

(The author is managing director, 4S Developers)

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