Home Prices Set to Surge in Coming Months

Last year home prices went up by 4-15 percent because of higher input costs faced by developers. Though steel and cement prices have since cooled off, buyers would likely have to embrace another hike in home prices this year.

The main reason is the continued rise in FSI premiums, capital, and metals pricing. Arguably, metal prices are now at a lower level than in the same period last year, they are still significantly higher than pre-COVID levels.

Developers are therefore gearing up to offset high input costs. In fact, the likes of Tata Realty & Infrastructure and Tata Housing Development Company are likely to scale up end pricing by 10-15 percent. Likewise, Godrej Properties, after a hike of 5-7 percent in Q4 FY22, has reinforced another 4-5 percent so far in the current fiscal.

In an official release, Godrej Properties concedes reinforcement steel prices, despite cooling off by 15-18 percent in the past few months, remain 3-4 percent higher than the same period last year. Cement goes much the same way with current pricing still 8-10 percent higher despite a downward trend of 2-3 percent last quarter.

In Bengaluru, the trend has ranged between 5-8 percent over the last year and is likely to replicate itself going forward.

The price movement is in confirmation with a study conducted by Anarock Research that suggests an average collective rise of 4 percent across the top 7 cities translating into Rs 5,727 per sq. ft in 2021 to Rs 5,941 per sq. ft in 2022 till date–corroborating CBRE’s projections for housing sales set to hit a ten-year high in 2022.

If we fall further back to the pre-pandemic period, then the avg. price rise across top 7 cities sits at 6 percent, from Rs 5,588 per sq. ft in 2019 to Rs 5,941 per sq. ft in 2022,”.

Most developers are pressed to align their products with revised price points. Ultimately, it is about striking the best balance between affordability and profitability.

Despite prices moving North, momentum in demand has not ceased. That has led to developers confidently aligning their micro markets and other macroeconomic factors.

One of the reasons for the sustained high demand is retail finance institutions driving sales in real estate in a significant way. This allows buyers to soak up marginal price movements with minimal impact on their buying decision-making.

Another key reason is buyer sentiment. Post-Covid, home buyers have come to the realization that real estate is a long-term hedge against market fluctuations. It also comes with security and stability. Trust in reputed developers is at an all-time high.

It is also bolstered by accelerated hiring that is witnessed in core markets like IT, ITeS, and healthcare, leading to an increase in purchasing power translating into sales factoring in price hikes.