--- title: It’s all a Matter of Chemistry… Indian Real Estate has the right mix description: What do Chemistry and Real Estate Markets have in common? image: https://blog.redribbon.co/hubfs/0_mvZDxM-IAWcGizPt-1.jpg --- 1 ## Blogs ![Indian Real Estate has the right mix](https://blog.redribbon.co/hubfs/0_mvZDxM-IAWcGizPt-1.jpg) # It’s all a Matter of Chemistry… Indian Real Estate has the right mix [![Avatar](https://blog.redribbon.co/hs-fs/hubfs/Suchit%20Punnose.jpg?width=34&height=34&name=Suchit%20Punnose.jpg) Suchit Punnose ](https://blog.redribbon.co/en/blogs-lists/author/suchit-punnose) ** Jun 22, 2022 5:26:57 PM ** [News](https://blog.redribbon.co/en/blogs-lists/tag/news) ** [Tech](https://blog.redribbon.co/en/blogs-lists/tag/tech) ** [India](https://blog.redribbon.co/en/blogs-lists/tag/india) ** [Real Estate Markets](https://blog.redribbon.co/en/blogs-lists/tag/real-estate-markets) ** [Real Estate](https://blog.redribbon.co/en/blogs-lists/tag/real-estate) ** [Investment opportunities](https://blog.redribbon.co/en/blogs-lists/tag/investment-opportunities) ** [Mainstream Impact Investment](https://blog.redribbon.co/en/blogs-lists/tag/mainstream-impact-investment) ** [Indian Economy](https://blog.redribbon.co/en/blogs-lists/tag/indian-economy) ** [Sustainable Investment](https://blog.redribbon.co/en/blogs-lists/tag/sustainable-investment) ** [Invest In india](https://blog.redribbon.co/en/blogs-lists/tag/invest-in-india) ** [Mainstrem Impact Investment](https://blog.redribbon.co/en/blogs-lists/tag/mainstrem-impact-investment) ** [General India](https://blog.redribbon.co/en/blogs-lists/tag/general-india)   Real Estate Markets have a lot in common with chemistry: take two parts, hydrogen, one of oxygen, and, hey presto, you get water; take high supply and liquidity levels, mix in the right interest rates…and, as if by magic, you get a housing boom. The magic’s all in the mix, and that’s why India has seen a surge in property sales over the first quarter of this year: 99,500 to be exact, which, according to Anarock ([www.anarock.com](http://www.anarock.com)) is the highest level since 2015. It equates to an annual rise of 71%, and the hotspots of Mumbai and Hyderabad accounted (on their own) for 51% of new starts and 48% of total sales. On any basis, it’s a heady mix, but it’s also the right mix…ignited by an unrelenting appetite for home ownership on the Subcontinent, and there’s no sign of it slowing down soon…it’s all a matter of chemistry. So let’s take a closer look at the key factors in the mix: supply, liquidity and interest rates. #### Supply-Side Dynamics New property starts in India have been rising exponentially since the dark days of COVID, creating an average 2% decline in unsold inventory (which, in turn, masks regional reductions as high as 11% in Chennai and 10% in Mumbai). And that’s not happening for anything: as Anuj Paul, Chairman of Anarock Group put it, with an admirable sense of understatement: “The unrelenting appetite for home ownership amid the pandemic, coupled with a growing certainty of impending price rises, has increased house sales velocity: we are witnessing a bull run in the housing market”. That makes it all the more important, then, for new and pent-up housing supply to be able to meet (if not exceed) demand…which is something India has been doing with a vengeance, and that’s the first part of its successful formula. Although, of course, there still has to be enough liquidity within the economy to fuel the demand… #### Liquidity Levels The Rupee has fallen sharply against the US Dollar over recent weeks (standing at 77.99 by 15 June), but that’s got more to do with a current 20-year high in US interest rates than anything else, and Central Bank interventions on the Subcontinent mean liquidity levels are still more or less Teflon coated: the Reserve Bank of India ([www.rbi.org.in](http://www.rbi.org.in)) remains committed to injecting added liquidity through open market operations (“OMOs), and is likely to continue with that policy for the foreseeable future. And even though the Federal Reserve is on a broadly parallel course, its own OMO activities are widely expected to fall off in intensity after September, leaving more headroom for India to pursue an increasingly expansive programme. All of which points to a stronger Rupee going forward and, of course, extra liquidity to turbo charge an already vibrant real estate sector. And that’s the second part of the mix. Which takes us to… #### Interest Rates Along with other leading economies, India has seen a recent spike in inflation (largely due to global factors outside its control, such as shortages caused by the war in Ukraine), but it’s nothing like as bad as, for example, the UK, which is projecting a 15% rate by year-end, and virtually zero (or negative) growth. The Subcontinent, on the other hand, is expected to have inflation rates significantly less than half that (6.04%) come the end of the year ([www.globaldata.com](http://www.globaldata.com)), and with India’s economy currently growing by 8.7%, the Reserve Bank has been able to opt for a much more controlled rise in the Repo Rate to 4.90%. That’s not going to do much (if anything) to dampen the resilience of its domestic property markets…which is more than you can say for the US and the UK, each of which has months of tortuous and ever more contentious rate rises in the pipeline. In short, home buyers in India can look forward to relative interest rate stability …which is the third and final element in the mix. So as you can see, there’s no special magic…it’s all a matter of chemistry. Executive Overview Macroeconomic policies, particularly when it comes to liquidity and interest rates, are sustaining a buoyant real estate market on the Subcontinent, and once you add in an increasingly impressive supply-side dynamic, it all adds up to a recipe for success…the chemistry couldn’t look better.   **[Invest in Red Ribbon RE RISE India Real Estate Fund](https://www.redribbonrerise.com/invest-now)** ![RRFM RERISE](https://blog.redribbon.co/hs-fs/hubfs/RRFM%20%20RERISE.png?width=236&name=RRFM%20%20RERISE.png) [Red Ribbon RE RISE India Real Estate Fund](https://www.redribbonrerise.com/) is a multi asset class closed-end fund registered in Luxembourg offering investors the opportunity to participate in Growth and Emerging Markets and Mainstream Impact Investments, such as India, that offer returns rarely available in western markets. ![Suchit Punnose](https://blog.redribbon.co/hs-fs/hubfs/Suchit%20Punnose.jpg?width=150&height=150&name=Suchit%20Punnose.jpg) [Suchit Punnose](https://blog.redribbon.co/en/blogs-lists/author/suchit-punnose) / About Author [![](https://blog.redribbon.co/hs-fs/hubfs/AdobeStock_282379113.jpeg?width=150&height=150&name=AdobeStock_282379113.jpeg) Previous Article Embracing the Future of Fintech…Bricks and Mortar Banking won’t cut it anymore ](https://blog.redribbon.co/en/blogs-lists/embracing-the-future-of-fintech-bricks-and-mortar-banking-wont-cut-it-anymore) [![](https://blog.redribbon.co/hs-fs/hubfs/MC.jpg?width=150&height=150&name=MC.jpg) Next Article Designing disassembly for the long run…It’s time to plan for a modular future ](https://blog.redribbon.co/en/blogs-lists/designing-disassembly-for-the-long-run-its-time-to-plan-for-a-modular-future) ### Leave a Reply ### You may also Like [![](https://blog.redribbon.co/hubfs/Imported_Blog_Media/AdobeStock_405850772-1-1.jpeg) ](https://blog.redribbon.co/en/blogs-lists/indian-equity-markets) ##### [Inflation Rears its Head...Indian Equity Markets and the New Equilibrium](https://blog.redribbon.co/en/blogs-lists/indian-equity-markets) [![Avatar](https://blog.redribbon.co/hs-fs/hubfs/Suchit%20Punnose.jpg?width=34&height=34&name=Suchit%20Punnose.jpg) Suchit Punnose ](https://blog.redribbon.co/en/blogs-lists/author/suchit-punnose) ** Jun 15, 2021 12:00:00 AM Inflation is a cornerstone of modern economic policy, the key indicator for growth: instilled as it... [Read More](https://blog.redribbon.co/en/blogs-lists/indian-equity-markets) [![](https://blog.redribbon.co/hubfs/shutterstock_2111873234-1.jpg) ](https://blog.redribbon.co/en/blogs-lists/insidious-to-sustainable-growth-but-india-knows-how-to-deal-with-inflation) ##### [Insidious to sustainable growth…But India knows how to deal with inflation](https://blog.redribbon.co/en/blogs-lists/insidious-to-sustainable-growth-but-india-knows-how-to-deal-with-inflation) [![Avatar](https://blog.redribbon.co/hs-fs/hubfs/Suchit%20Punnose.jpg?width=34&height=34&name=Suchit%20Punnose.jpg) Suchit Punnose ](https://blog.redribbon.co/en/blogs-lists/author/suchit-punnose) ** Apr 14, 2022 9:18:12 AM There’s no inflation in a junkyard, and India is a world away from junkyard status: for a decade or... [Read More](https://blog.redribbon.co/en/blogs-lists/insidious-to-sustainable-growth-but-india-knows-how-to-deal-with-inflation) [![](https://blog.redribbon.co/hubfs/Imported_Blog_Media/shutterstock_189495842-1-1-1.jpg) ](https://blog.redribbon.co/en/blogs-lists/whats-so-special-about-india) ##### [What's so special about India... arbitrage and a perfect storm for growth](https://blog.redribbon.co/en/blogs-lists/whats-so-special-about-india) [![Avatar](https://blog.redribbon.co/hs-fs/hubfs/Suchit%20Punnose.jpg?width=34&height=34&name=Suchit%20Punnose.jpg) Suchit Punnose ](https://blog.redribbon.co/en/blogs-lists/author/suchit-punnose) ** Jul 20, 2021 12:00:00 AM How times change: when lockdown restrictions were imposed last year, most economic analysts... [Read More](https://blog.redribbon.co/en/blogs-lists/whats-so-special-about-india)