Real Estate – Good Performer in 2022 & Prospects in 2023

Real estate got a massive boom in prices in 2022 and it was a record-breaking year not only in terms of RE sales but also new launches. Low-interest rates, cuts in stamp duty, and rising work-from-home culture all acted as solid tailwinds for the real estate sector in the last year. After almost a decade of flat returns, 2022 saw an incredible price rise, especially in some places like Gurugram, Haryana.

Unlike equities/ debt, Real estate is a fairly opaque market where getting price and inventory details are difficult. There is also a fair bit of cash transaction involved. Still, the trend was quite clear with land prices in cities seeing large increases. In Gurugram land prices zoomed from Rs.40-50K per square yard to Rs.1.24-1.40 lakhs per square yard. Apartments also saw a rise in returns from 30% to 60%. RE stocks have also started to perform well. You can track their performance through various indices like BSE Realty Index, Nifty Realty Index, NHB Residex, etc.

Factors that led to a Successful 2022 for Real Estate

a) During the first half of 2022, housing loans could be availed at 6.5%-7% which was quite low.

b) Affordability was at its decadent best with price/ income ratios at near lows as income levels improved significantly with RE prices remaining flat.

c) Debt and equity did not do well. Also, RE performance is weak at times of inflation.

d) RE policies like RERA have improved transparency with the government giving additional tax-saving benefits for lower-income consumers.

Also, read Best Sectors to Invest in Equities in 2023

Real estate cycles are generally long so you can expect another 2-3 years of good returns. Price increases also bring momentum investors. While 2023 has seen interest rate hikes, it still remains comfortable at around 8.5%. Not much increase is expected as the RBI is nearing the end of its cycle.

Real estate demand remains huge as most people need to upgrade to gated societies, and new buyers have also entered. The luxury segment has done very well and continues to grow. Besides, there is a huge demand in the affordable and mid-segment as well.