[ecis2016.org] Here’s a look at the challenges and opportunities that the real estate sector faced in 2021 and whether the new year will be a buyer’s market
2021 was expected to be the year of recovery for the Indian real estate sector that weathered the black swan of the Covid-19 pandemic in the preceding year. Throughout the year, developers put up a brave face and the industry data of the top-listed developers was enough to keep hopes alive. However, a closer look at the sector raises several questions.
You are reading: Real estate sector highlights in 2021 and what we can expect in 2022
In spite of the challenges, 2021 stood in sharp contrast to the preceding year, when the Covid-induced lockdown put real estate transactions at a standstill. Labour migration and buyers’ reluctance to visit project sites had put a question mark over the future of the real estate business.
However, it would be fair to say that 2021 gave some ray of hope to the sector. The year witnessed cash-rich buyers returning to the market. Lower costs of borrowing and the availability of ready-to-move-in inventory in the market helped transactions. Nevertheless, the year, by and large, was disappointing for developers who had high inventory but a low level of brand goodwill.
The year 2022 does not promise to be any different than 2021, as far as the fundamentals of the market and macroeconomic outlook are concerned. As a matter of fact, 2022 could be even more challenging for more than one reason. Rising input costs have put a question mark over the feasibility of the business in a price-sensitive market. Many developers, with thin profit margins, are facing a tough situation, where the input cost hike is compelling escalation but the demand side is not ready to absorb the hike.
Furthermore, with today’s apprehensive buyer not in a position to shell out both the rent and the EMI, the new launches would be few and far between. Most developers would prefer to either offload the inventory and/or finish the project.
Pains and gains of 2021
| Gain | Pain |
| Market recovery after lockdown | Raw material cost escalation |
| Cash-rich buyers back in the market | Industry recovery is not uniform |
| Low interest rate | No takers for new launches |
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Real estate in 2022 : Challenges for the sector
- Balancing input cost and price point
- Value engineering to reduce project cost
- Inflation challenges for both, developers and buyers
- Job market degrowth to affect home buying
- Viability of new launches
Realty highlights in 2021
The industry is full of optimistic voices. Vinit Dungarwal, director at AMs Project Consultants, admits that the year 2021 was full of challenges but the sector has also been able to create unique opportunities. During this time, developers embraced the digital medium and reworked traditional models. The testing times also enabled the industry to gauge risks associated with the fluctuations in the market. With technology and data taking centre stage, there was significant demand for new data centres. Concepts such as senior living have also found traction in 2021 and these will continue to thrive in 2022, he says.
Aditya Kushwaha, CEO and director of Axis Ecorp, believes that the historically low interest rates and the RBI’s firm assurance of maintaining the status quo have helped in reviving demand in the residential sector. Feature-packed holiday homes, sophisticated luxurious houses and gated townships with well-managed infrastructure have emerged as the most preferred choice for the consumers.
Rohit Garodia, managing partner at Pecan Reams, says that the government has been hugely supportive by making multiple incentives available. The stamp duty cuts, lowest-ever home loan rates and developer discounts are all reasons for the massive buying in the real estate market that we have witnessed and we only expect to see this trend grow in 2022, says Goradia.
Niranjan Hiranandani, vice-chairman, national, NAREDCO and MD, Hiranandani Group, points out that the accelerated vaccination drive, softening of home loan interest rates, buoyant capital market, liquidity infusion, highest FDI and market consolidation, were the key highlights of 2021.
Developers’ outlook for 2022
“The year 2022 will witness a string of new project launches in the residential and commercial market. An uptick of both, buyers’ and investors’ confidence, will augment home-ownership value and will further fast-track home up-gradation. The new year will be dynamic as it will set off new innovations in design, planning and amenities deliverables. Young home buyers will seek modern homes inclusive of open layouts, flexi-spaces, home automation and sustainability and a lifestyle that facilitates walk-to-work. Thus, commercial real estate will witness dispersed demand, with a hub and spoke model in peripheral twin cities and suburbs,” concludes Hiranandani.
“Buyers’ psyche has undergone a significant change in this new normal. Home buyers are being very thorough with their due diligence and want to cover all bases, before zeroing in on a property or a project of their choice. Apart from features, locality and interiors, prospective buyers are also considering the ROI before taking the plunge,” says Dungarwal.
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“The real estate segment has shown a lot of tenacity in 2021 but the escalating cost of raw materials is a cause of concern. More so, the trends suggest that the prices of raw materials may not stabilise or decrease in the near future. For now, the players have been absorbing the escalating costs but if the prices continue to shoot up, the developers may have no option but to pass the burden to the home buyers,” says Kushwaha.
According to Goradia, 2022 will continue to evolve as a buyer’s market. “While there is a rising input cost with the commodities cycle and an upswing in the steel prices being at an all-time high, we don’t see this as a major issue in the overall demand in the market. Most developers will not look to increase their sales prices but will want to keep the volumes going,” he predicts.
Vipul Shah, managing director of Parinee Group, says that in 2021 the focus was on new-age concepts like going ‘phygital’, where spaces will define the user experience in the physical world by making use of technology as an enabler. Developers have been experimenting with strategies, using virtual reality, augmented reality and machine learning, and catering to a smart and frictionless workforce.
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In 2022 and beyond, we expect hybrid spaces to offer a new-age workplace experience, says Shah. “An overall improvement in the job market, resumption of economic activity and pent-up demand, will continue to guide the real estate market in 2022. Ready-to-move spaces are in demand and since they are available in limited units, this demand will shift to under-construction projects in the coming year,” he maintains.
The year 2021 has been a witness to the K-shape recovery where a handful of big brands could gain a sizable market share. It has, nevertheless, not been a uniform recovery for all developers. While 2022 is unlikely to be any different, the real challenge for developers could lie in passing on the rising input costs to the buyers.
(The writer is CEO, Track2Realty)
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