The real estate sector is back in the spotlight after home sales recorded strong growth in the July-September 2022 quarter.

According to data from ANAROCK, residential property sales in NCR Delhi, Metropolitan Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Pune increased by 41% year-on-year to 88,234 units.

New launches also increased 45% year-over-year to 93,490 units in these seven cities in the quarter just ended.

However, post-pandemic, the sector remains vulnerable to successive rate hikes. Against this backdrop, analysts believe optimism in housing demand would outweigh longer-term rate hikes.

Nishit Master, Portfolio Manager, Axis Securities, says high demand environment for real estate. Positive stable inventory for new launches. Wage growth to offset turbulence from rising rates. Bullish on Godrej Properties, DLF, Mahindra Lifestyle.

Additionally, investors turned positive on the sector in the second quarter of FY23 after a relative underperformance in the prior quarter.

On the stock exchanges, shares of Brigade Enterprises, DLF, Godrej Properties, Indiabulls Real Estate, Oberoi Realty, Prestige Estates, Phoenix Mills and Sobha jumped as much as 28.3%.

By comparison, the S&P BSE Sensex and Nifty50 gained more than 8% each, in the July-September quarter.

That said, experts fear that the relentless rate hikes could inflate commodity costs, pushing up property prices and dampening demand.

“This blow of rising rates is accompanied by inflationary trends in primary commodities, including cement, steel, labor, etc., which have recently led to higher property prices. These factors will impact residential sales which performed reasonably well in the first half of 2022,” says Anuj Puri, Chairman of ANAROCK Group.

Given that the current interest rate continues to be at lower levels than 10 years ago, further rate hikes could derail demand momentum, analysts warn.

Arun Chulani, co-founder of the First Water Capital Fund, says the holiday season heralds demand for housing. Real estate prices are stable compared to the last decade. Rate increases still lower than those of 10 years ago. Rate hikes to shake homebuyer sentiment.

Turning to today, the movement of the rupee, foreign flows and crude oil prices will guide domestic markets on Thursday. Globally, the Crude Oil Inventories report, US inflation and employment data will be watched closely.