Expect Tier 2 cities to gain more momentum as prime residential markets soon- Sudhir Pai, Magicbricks

Expect Tier 2 cities to gain more momentum as prime residential markets soon: Sudhir Pai, Magicbricks

The Indian real estate market is currently in its best shape since 2014, with healthier developer balance sheets and shorter property sale cycles. While caution is advised to prevent excessive price increase, the next couple of months show promising signs of increase in residential demand and supply, says Sudhir Pai, CEO, Magicbricks.

In an exclusive interview with Sanjeev Sinha, Mr Pai talks about the growth prospects of the Indian real estate market for the coming year and shares his business outlook. Excerpts:

In the third quarter (Jul-Sep 2023), residential demand surged an impressive 8.4% QoQ, reflecting a strong interest from homebuyers. This surge coincided with favorable macroeconomic factors, including the recent G20 summit, stable interest rates, and an approaching festive season. Residential prices also rose by 5.4% QoQ during this period, and with developers expediting project delivery, we anticipate increased inventory in the coming months.

The Indian real estate market is currently in its best shape since 2014, with healthier developer balance sheets and shorter property sale cycles. While caution is advised to prevent excessive price increase, the next couple of months show promising signs of increase in residential demand and supply.

Also Read: How to build wealth through real estate investment

Are there specific regions that Magicbricks believes hold significant growth potential in the near future? What are Magicbricks’ growth and expansion plans for the upcoming year, and what areas or aspects of the business are you looking to focus on?

Magicbricks is betting big on tier 2 cities such as Nagpur, Coimbatore, Bhubaneshwar, Indore and Jaipur which are fast emerging as Real Estate Growth Engines. With an uptick in economic activity and employment opportunities, we expect tier 2 cities to gain more momentum as prime residential markets in the coming months.

According to Magicbricks’ “India’s Tier 2 cities: Emerging Real Estate Growth Engines” report

In 2022, Nagpur (49%), Coimbatore (27%), Bhubaneswar (12%) observed the highest YoY growth for residential demandIn 2022, Nagpur (84%), Coimbatore (30%), and Indore (6%) exhibited the highest YoY growth for rental demand (searches).

While offline channels and personal networks have traditionally driven real estate investments in these markets, there is a notable shift towards digital adoption. Magicbricks is at the forefront of driving this behavioral change by bringing audiences online and consolidating the fragmented real estate market.

Our approach includes:

Expanding property listings on Magicbricks’ platform, providing customers with an extensive array of choices.Investing in bespoke communication campaigns, reassuring customers that we understand the nuances of their city and are the ideal partners on their quest for dream homes.Uplifting the entire ecosystem by sensitizing home-owners, developers and builders, and equipping them with the information and technical expertise to enlist their properties online.

We are happy to see a steady growth momentum and our business is growing by 35% YoY in these cities, and we expect the momentum to continue in the coming years

Noida and Greater Noida have also stepped into the limelight with a remarkable spike in the residential demand, (38.9% and 20.4% QoQ respectively, in July-September 2023). This surge exemplifies the evolving landscape of property preferences, signaling a burgeoning interest and potential for growth in these regions.

What macroeconomic or regulatory factors might influence growth prospects in the Indian real estate market?

We can anticipate that interest rates will remain unchanged. Steady home loan rates augment demand and encourage prospective home-buyers to invest in real estate.Other encouraging government policies such as generous allocation for the infrastructure sector and 66% upsurge in the Pradhan Mantri Awas Yojana (PMAY) outlay are expected to broaden the economic advantages towards affordable housing.

What are the prevailing sentiments among customers when it comes to residential real estate investments in India? Any data insights that define this?

There’s a prevalent sense of optimism returning to customers due to economic stability, favorable government policies, stable interest rates, and increased allocations for infrastructure development. There is a growing preference towards investment in real estate, especially from the millennials who are seeking properties that are spacious, offer good amenities, location advantages, and potential for appreciation. There’s also a rising interest in sustainable, eco-friendly properties and smart homes equipped with modern technology.

Data as of September 30, 2023 (Source Magicbricks PropIndex Report Jul-Sep 2023)

3BHK and plus homes are most popular: 52% homeowners want to buy this configuration. Supply is also mirroring this and 47% homes are 3BHK or more.Overall, mid-sized properties (1,000-2,000 sf) were most preferred across all the top 13 cities of India. Specifically, cities like Thane (53%), Kolkata (52%) and Navi Mumbai (50%) were popular for homes within 1,000-1,500 sf area. While Hyderabad (51%), Ahmedabad & Noida (48% each), Greater Noida (47%), etc. favored properties within 1,500-2,000 sf.The highest demand for affordable housing units was observed in Greater Noida (75%), followed by Ahmedabad (63%) and Kolkata (52%). At the same time, cities of MMR and NCR preferred premium housing units – Mumbai (90%), Navi Mumbai (57%), New Delhi (54%) and Gurugram (46%).