India's construction sector levels up as housing demand spurs economy

DLF

02/12/2023 04:56

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      Home sales in top cities climb 36% in July-Sept quarter
    

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      Sales driven by rising incomes, housing shortage, govt
subsidies
    

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      Construction boom could continue for next 3-4 years
-builder
    

        * 
      Nifty realty index has surged 67% this year
    

  
    By Manoj Kumar
       NEW DELHI, Dec 2 (Reuters) - If India needed any more
proof that it was in the midst of a huge housing boom, it got in
this week's GDP data, heightening expectations that the industry
will continue to power the economy for years to come.
    The construction sector grew 13.3% in July-September from a
year earlier, up from 7.9% in the previous quarter and its best
performance in five quarters, the data released on Thursday
showed.
    That helped India expand at a forecast-beating 7.6%, making
it one of the world's fastest-growing major economies. In
contrast, Western economies have been squeezed by high interest
rates and energy prices, while China has been hobbled by a debt
crisis in its property sector.
    The long-awaited boom - which has created millions of jobs -
comes after about six years of debt and pandemic-induced
downturn before the construction sector began improving last
year and hitting its stride this year. It has been driven by
rising incomes for many Indians, a severe housing shortage in
big cities and strong population growth.
    The world's most populous nation had an urban housing
shortage of around 19 million units last year - and that is
expected to double by 2030, according to government estimates.
    "The robust growth in construction has significantly
contributed to the economic growth - and is likely to play the
same role in next couple of quarters," said Sunil Sinha, an
economist at India Ratings and Research, an arm of rating agency
Fitch.
        Builders are bullish long-term with many saying the boom
could last two to three years and some even more optimistic.
    "The housing market could continue to perform well for
another three to four years," Sanjeev Jain, managing director at
Parsvnath Developers, a leading real estate company, noting that
India is in the initial stages of a housing growth cycle.
    Home sales in India's seven largest cities, including 
Mumbai, New Delhi and Bangalore, rocketed 36% in the
July-September quarter from a year earlier to more than 112,000
units, despite an 8%-18% increase in prices, according to real
estate consultancy Anarock.
    There was also a 24% increase in new residential projects
being launched, data from the consultancy showed.
    "The home sales are driven by first-time buyers, and nearly
80% of the houses have been bought by end users," said Prashant
Thakur, head of research at Anarock, adding that there was also
strong demand from existing home owners to move to more spacious
apartments.
    In Mumbai, for example, demand has been strong despite an
increase in interest rates of about two percentage points,
according to Jayesh Rathod, director of Mumbai-based Guardian
Real Estate Advisory.
    His company has sold over 5,500 flats in Mumbai and on its
outskirts in Thane so far this year, a jump of more than 50%
compared to the same period a year ago, he said.
    Underpinning demand has been salary hikes for workers in big
cities. Average hikes for sectors such as e-commerce,
healthcare, retail and logistics have remained above 10% for a
second straight year, according to EY estimates.
    Home prices in India are expected to rise faster than
consumer inflation next year, according to a Reuters poll, with 
property analysts saying growth will be driven by higher earners
snapping up newly built luxury residences in cities.
    Housing demand has also picked up significantly in smaller
cities in the southern states of Tamil Nadu, Karnataka and Prime
Minister Narendra Modi's home state of Gujarat, according to
construction companies who say demand has been spurred by
increases in incomes and the migration of workers from rural
areas.
    The government is also trying to boost the availability of
affordable housing by providing subsidies, which is encouraging
construction in India's smaller towns and cities.
    Shares in property companies have naturally surged.
    The Nifty realty index  .NIFTYREAL  is up some 67% for the
year to date compared with a 12% gain for the blue-chip Nifty 50
index.
    Notable gainers include Prestige Estates Projects  PREG.NS 
which has jumped some 120%, DLF  DLF.NS  which has climbed 67%
and Godrej Properties  GODR.NS  which is up 52%.
    
                
     ($1 = 83.3143 Indian rupees)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Home sales rise across all big cities    https://tmsnrt.rs/46Dj5NY
The upsurge in supply    https://tmsnrt.rs/415Q4sT
Housing index soars    https://tmsnrt.rs/3GrFfbf
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 (Reporting by Manoj Kumar, Additional reporting by Nigam
Prusty; Editing by Ira Dugal and Edwina Gibbs)
 ((manoj.kumar@thomsonreuters.com; +919810286200;
Twitter:@manojgulnar;))