As the sector gears up to enter another phase in 2021 with the arrival of the Coronavirus vaccine, it will have to realign itself with buyers’ new expectations
India’s reality might not have been what mathematical statistician Nassim Nicholas Taleb terms as a ‘black swan-robust society’. The Indian economy started to show signs of crumbling, in the aftermath of the unprecedented challenges caused by the Coronavirus pandemic in early 2020. The COVID-19 virus outbreak had a shattering impact on India’s economy in general and its real estate sector, in particular – an area of work that requires human contact inherently.
However, to overcome the overwhelming effects of the pandemic, all stakeholders in India’s realty sector, which happens to be the biggest employment-generating sector in India after agriculture, came together to try and restore normalcy.
2020: When Indian real estate changed for the better
While 2020 will be remembered for the Coronavirus and the subsequent lockdowns, India’s real estate sector, especially that of the Mumbai Metropolitan Region (MMR), will remember it for the economic turnaround and demand revival, says Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.
“After the announcement of the nationwide lockdown, it was extensively predicted that this will be the year of real estate’s greatest fall. The outcome was quite the opposite, with November 2020 recording the highest number of residential registrations in almost a decade (In Maharashtra),” says Agarwal, adding that such an unprecedented and unimaginable recovery was possible, owing to Reserve Bank of India’s (RBI’s) decision to reduce the repo rates and state governments reducing the stamp duty.
According to Mohit Goel, CEO, Omaxe, the positives that have emerged from the COVID-19 crisis will form the cornerstone of growth in the realty sector and overall Indian economy in the coming decades.
“While 2020 has been an unprecedented year globally, it has been able to create certain unique opportunities for the realty sector that are likely to usher in a new era of innovation and digital transformation. As we continue to learn to live in this COVID era, 2021 would require us to reimagine the way we have operated so far,” says Anshuman Magazine, chairman and CEO, India, South East Asia, Middle East & Africa, CBRE. According to Magazine, the realty sector has not remained untouched from the recalibration but has shown remarkable resilience in the face of the pandemic.
According to CBRE data, housing sales in the July-September 2020 quarter increased by a strong 86% on a quarterly basis. As against 12,000 units in Q2 2020, 22,000 homes were sold in the top seven cities in Q3 2020. Strong policy support though last-mile funding mechanisms provided by the government for delayed housing projects, low mortgage rates, reduction in stamp duty and property registration fee in a few states, along with incentives and attractive payment schemes offered by developers, has helped in boosting stakeholder sentiments, which, points out Magazine, has strengthened the confidence levels of end-users and fence-sitters.
Among the many learnings, the pandemic imparted to the sector is embracing the digital mediums. In fact, if not for those, it would have been nearly impossible for the sector to see any sales, whatsoever. “The year saw a growing thrust towards digitization and technology adoption, chronicling a new era in the industry. There has been a significant rise in digital launches, virtual property events, online listing and viewing, data analytics, cloud-based services, and much more. The traditional O2O (online to offline) model is now recalibrating, with digital mediums now playing a much bigger role,” says Ankit Kansal, co-founder and MD, 360 Realtors.
Indian real estate outlook for 2021
As the sector slowly trends on the path to recovery, it has to realign to face new realities and meet greater expectations.
Affordable housing to lead the way to recovery
Stating that people have realized the importance of owning a home and that this feeling is going to persist, Pradeep Aggarwal, co-founder, and chairman, Signature Global, says, “The market for affordable housing is robust and there will be more movement in the coming months.” Aggarwal is also the chairman of Assocham’s national council on affordable housing.
“We expect a gradual improvement in sales across all segments, although mid-income (Rs 45 lakhs to Rs 1 crore) and budget (less than Rs 45 lakhs) categories are expected to be the key focus areas among home buyers and are expected to perform relatively better,” says Magazine.
According to Achal Raina, COO of Raheja Developers, plotted developments and affordable housing witnessed increased inquiries and stable demand respectively. The mid-segment housing may take six to eight months of 2021 to bounce back to pre-COVID-19 levels, due to the reeling market but the festive season did register a certain momentum due to the lucrative offers.
Agreeing to this trend riding the market, Rajat Goel, JMD, MRG World says, “Affordable housing has emerged as the most preferred segment with respect to the amenities offered by developers at reasonable prices. It is also gaining interest from investors, especially in metros like Gurgaon. This segment is likely to continue getting this boost if infrastructure developments around the project are being completed timely.”
Demand for large, secure homes to increase
Along with affordability, builders will also have to offer facilities for a healthy lifestyle in the post-Coronavirus period, something that is a key criterion to pick projects. Experienced developers have, in fact, already revised their upcoming projects according to the changing preferences of homebuyers.
“In the future, customers will not be satisfied only with quality living spaces offered within the four walls and locational advantages for value appreciation. The future of real estate will depend on the integration of high-grade efficient delivery of personal mobility, housekeeping, wellness, provision of walking and cycling tracks, payment of maintenance and other fees, digitally-enabled grocery, milk, and newspaper delivery, and other necessary concierge services like payment of user charges, hailing a cab, postal and courier services, with high-quality living spaces made aesthetically and thoughtfully,” says JC Sharma, vice-chairman and managing director, Sobha Limited. “All this is possible with the use of intelligent data and analytics, which can provide personalized experiences to the customers. The more we tailor-make our offerings and address issues of concern, the more relevant we shall become,” he adds.
“In 2020, the demand for bigger homes inside an open, hygienic and green complex, with facilities like healthcare, daily necessities and everyday rejuvenation within walking distance, formed the crux of increased demand for branded and reputed developers who would not just provide value-for-money products and services but also had the ability to deliver those projects,” states Mohit Goel.
Vimal Monga, vice-president of sales and leasing (commercial), TDI Infratech, opines that the coming year will see increasing demand, owing to the people’s likeness for gated communities post-COVID-19, due to the ability of these projects to provide a complete healthy lifestyle. Harvinder Singh Sikka, MD, Sikka Group, concedes that point. On similar lines, Prateek Mittal, executive director, Sushma Group, says that the demand for integrated townships is on rising, due to their amenities provided within the premises and controlled living conditions. “Residential spaces that promise holistic living, unique amenities, and strategic locations, would become the epitome of an ideal home,” says Raman Gupta, director-branding and construction, GBP Group.
Tier-2 and tier-3 cities to witness greater demand
The reverse migration, caused by the rise of the remote working culture, led to the emergence of heightened demand for homes in tier-2 and tier-3 cities, including rentals.
According to Goel, the increased investment in infrastructure development by governments and businesses, in developing tier-2 and tier-3 cities as centers of economic activity, along with increased consumer spending, will write the story of growth, employment, and opportunities in the coming decades in India.
While industry insiders are unanimous that tier-2 and tier-3 cities are going to witness a great deal of increased activity, some also point out that heightened activity is expected in metros like Bengaluru, Hyderabad, Mumbai, Pune, and select parts of Gurgaon and Noida.
Ready homes to remain a preferred option
It is also pertinent to mention that project delays, especially in the NCR market, could be cited as one of the biggest reasons behind a demand slowdown that has gripped India’s realty market since 2014. As delivery timelines remain a key concern even now, almost everyone is of the opinion that the demand for ready-to move-in homes is likely to be strong, to avoid project delays.
Vijay Verma, CEO, Sunworld Group, says that ready-to-move-in units became the most preferred choice in 2020 due to reduced risks, when buyers realized the value of property ownership and made efforts to buy properties of their own, despite financial stress.
Magazine points out that the GST rate cuts for residential properties have bridged the taxation gap between an under-construction and completed project, thereby, whetting the appetite for under-construction projects. Note that buyers of affordable property have to pay only 1% of the property value as GST. Projects launched in locations with developed physical and social infrastructure are expected to see greater traction in the coming year, Magazine adds.
Real estate investment in 2021
As low-interest rates and stamp duty reductions are being viewed as the biggest reasons for the revival, so far, the developer community opines that banks must continue to maintain rates at the present levels. Even though the RBI continues to maintain an accommodative stance, it is unlikely to lower the repo rate any further, because of stubbornly high inflation. In case of an upward move, banks would follow suit by increasing home loan interest rates, thereby negatively affecting demand.
Builders believe that further rationalization of stamp duty will also be instrumental, in keeping the momentum. Arguing that there might be a period of slowdown after the ‘panic buying’ till April 2021, Agarwal suggests the Maharashtra government maintain the stamp duty charges at 3% for another 12 months. “We would also urge states across India to reduce stamp duty charges temporarily, to make realty buying lucrative. We would also like to recommend that the government at the center announced a 10% deviation in circle rates for all categories of homes and not just homes up to Rs 2 crores. This will help further reduce the unsold inventory levels that exist in the luxury home segment to date,” Agarwal concludes.
Source – https://housing.com/news/will-the-new-year-be-a-turning-point-for-indias-real-estate-sector/
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