For Indian real estate, the Coronavirus pandemic was a huge blow, affecting home sales and new launches. However, a silver lining emerged soon after, in the form of demand for bigger, better homes, a decrease in lending rates, and the increasing popularity of small cities in India
The year 2020 will always be remembered for the spread of the Coronavirus that brought the entire world to a screeching halt, something unheard of in the past 100 years. Around the world, the hospitality and tourism industry, arts, cinema and recreation, manufacturing, retail, and construction were among the hardest hit. A year on, most industries are trying out new ways to adjust and thrive in an otherwise muted economy.
How the property market was adversely hit in 2020
Home sales, supply, and inventory overhang
Prospective home buyers are usually cautious lot. The research, engage, understand, and consult, before actually buying a property. With the COVID-19 pandemic, home buyers were left in a lurch, unable to get out of their homes and physically verify the details of properties. Resultantly, by the quarter ending June, home sales dipped by 79% while new supply fell by 81%. Only a little over 12,000 units constituted new supply in the three-month period, as per PropTiger research. A year back, that number was 65,238 units. Inventory overhang by July-September quarter continued to remain high in the National Capital Region (58 months) and in the Mumbai Metropolitan Region (MMR).
It would not be quite right to say that the Coronavirus impact on real estate was visible in the form of property price correction. Property prices have remained fairly stable with average property prices changing by -1% to 6%. This means that on the whole, property prices have not gone down. However, to lure fence-sitting buyers, many developers have come up with price discounts, flexible payment plans, attractive EMI offers, concessions on preferential location charges, freebies, etc. At the same time, real estate developers do maintain that there is no scope of further price correction.
Positives for the real estate sector in 2020 that will shape its future
One might wonder whether there was anything good about 2020, especially for the property market in India. A lot has changed since March 2020. Here is what has changed for the better.
The rise of the work-from-home model
Almost 90% of India’s 4.3 million IT workforce started working from home with the onset of the lockdown in India. Most other sectors too opted for the same route. Over the last 10 months, productivity increased by over 13%, says Stanford Professor Nicholas Bloom. In India, despite the fair share of problems, companies have now realized that this is the new normal. Hence, companies are increasingly considering the permanent work-from-home model or the hybrid model. Sanjay Srivastava, a 32-year old client-engagement officer in an MNC, says that his company is taking one step at a time and has just announced work-from-home till December 2021. While commercial reality may take a hit, residential real estate is in for big gains.
“The shift towards work-from-home and the study-from-home culture has kindled home seekers’ interest to upgrade to large spacious luxury homes for a better quality of living,” says Niranjan Hiranandani, MD, Hiranandani Group.
Shashank Tripathi, a home buyer in a Noida-based project, says that his family chose to finally consider Greater Noida, as he and his wife, who was working in south Delhi, were now on work-from-home, permanently. “There is no trouble of having to commute long distances for work now, no traffic bottlenecks, etc. So, we decided to go with Noida as this market offered affordable homes when compared to most other parts of Delhi and Gurgaon. In the past, walk-to-work was quite a concept but slowly people realized it commands a premium. Such concepts work, only if governments come up with special economic zones in the peripheral locations. Post-Coronavirus, preference for peripheral localities has seen a jump. In my case, we had gone in for a group booking for four families,” says Tripathi.
We asked Akash Bhutani, a realtor in Noida, about the kind of change that he sees in the market today. “Spacious homes and better pricing remain the top priority. Those who were looking at 2BHK units are now asking for 2.5BHK units, where the additional space can be converted into a study. This is happening mostly because home buyers are looking at installing a proper work-from-home infrastructure that would not hinder their children’s ongoing online classes,” Bhutani observed. Everyone, from the industry to the home buyers claim that their expenses while working from home and arranging online classes for their children, have gone up. However, on the whole, it is a great respite from spending several unproductive hours on travel and commute.
Rise of tier-II and tier-III cities
With work-from-home gaining trust, need and popularity, smaller cities (which are usually where a bulk of youth migrate from, to bigger cities), are now gaining traction. Going back to Patna and continuing to work for the edu-tech platform was one of the best decisions Manish Goyal has made for himself. “I was stuck in Patna when the lockdown was announced but that did not hamper my work. Once the lockdown ended, I quickly went to Gurgaon and made arrangements to come back to my parents and family, for good. I am saving at least Rs 35,000 – Rs 40,000 per month now, which was otherwise spent on rent, food and commuting,” he says. Goyal plans to invest in New Bailey Road in Patna, one of the upcoming localities with projects that are nothing less than the ones in big cities but with more space.
Focus on home-based comforts
“The future looks bright for home automation. As we spend more and more time in our homes, we will naturally look to automate some of our daily tasks. Consequently, the trend towards installing smart home solutions has seen an uptick amid the pandemic,” says Swati Santani, VP, Design R&D, adding that home security too may gain importance in the new year.
Fitness trainer and gym owner Vikas Sood says that while the fitness industry took a hit in terms of physical spaces, app-based fitness routines seemed to click with a large number of individuals, most of whom paid anywhere between Rs 1,000 and Rs 3,000 per month, to be actively working out from the comfort of their home with their gym instructors, online. “One of my clients went in for a larger home immediately after the lockdown ended, simply to be able to keep all his fitness equipment and accommodate his work-from-home setup. This has become a necessity now,” says Sood.
For Charulata Goswami, who is working from home with her two daughters, the long-pending dream of becoming a homeowner is coming to a reality. The Goswamis have been hunting for a suitable home over the last three years but were held back often, either, because the location was not suitable or the project was unaffordable. By February 2021, the Goswamis plan to move into a society apartment with enough space to accommodate working parents and two school-going kids.
Home loan interest rate cuts in 2020
Banks have brought home loan interest rates to below 7%-level, since the RBI brought the repo rate to 4%. For example, State Bank of India is offering home loans at 6.95%, while HDFC is going with 6.90%. Bank of Baroda is offering loans at 6.85%. Compared to yesteryears when the rate was anywhere between 8.50% and 10.50%, the cut in rates is a welcome change.
Stamp duty reduction
A limited period stamp duty reduction in many states like Maharashtra and Karnataka has helped win over fence-sitting buyers. The Housing Ministry has urged all states to lower stamp duty charges. A few states have implemented it and a slight surge in inquiries and high-intent demand has been visible.
Affordable housing in 2020-21
One of the top reasons that led to more people opting for 2BHKs rather than 3BHKs in the yesteryears was the unaffordability. To own a home in a big city was a distant dream for many. With the Pradhan Mantri Awas Yojana (PMAY) scheme, a lot of first-time homebuyers, earning up to Rs 18 lakhs annually, realized the dream of becoming homeowners. In Budget 2020, the government extended the benefit of the additional deduction of up to Rs 1.50 lakhs for interest paid on loans for affordable houses by an additional one year, till March 31, 2021.
Over the months, the RBI has also infused Rs 3.74-lakh crores of liquidity into the economy, and the Credit-Linked Subsidy Scheme (CLSS) was also extended. While the unprecedented cut in the repo rates has been the most helpful, resulting in sub-7% home loan interest rates, the fact cannot be negated that the affordable housing segment which boasts the maximum demand from the Indian middle class, turned COVID-19 and its aftermath into an opportunity.
Source – https://housing.com/news/the-best-and-worst-for-indian-real-estate/
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