[ecis2016.org] 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. In spite of the corrective measures that were put in place to battle the adverse effects of the pandemic, the second wave of COVID-19 caused further dents in economic growth, forcing rating agencies and global think-tanks to lower their growth projections for India in 2021. Overall, 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.
You are reading: Will 2021 be a turning point for India’s real estate sector?
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.
What will be the crucial learnings from 2020 for the real estate sector in the year 2021? Watch our webinar on ecis2016.org, moderated by Jhumur Ghosh (editor-in-chief of ecis2016.org News), with industry experts including Manan Shah (MD, MICL Group), Anuj Goradia (MD, Dosti Realty), Samyag Shah (director, Marathon Realty), Rushank Shah (promoter, Hubtown Ltd) and Chintan Sheth (director, Ashwin Sheth Group).
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. A 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, have helped in boosting stakeholder sentiments, which, points out Magazine, has strengthened the confidence levels of end-users and fence-sitters.
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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 digitisation 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.
[ecis2016.org] Will 2020’s festive season bring cheer to India’s COVID-19-hit housing market?
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 realised 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 enquiries 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 home buyers.
“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 personalised 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 of integrated townships is on rise, 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
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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 centres 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.
Also read: ‘Shadow Cities’ thunderbolt Metros in Virtual Residential Demand
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 realised 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.
[ecis2016.org] Impact of GST on real estate and home buyers
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 a 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 rationalisation 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 to 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 centre announce 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 till date,” Agarwal concludes.
FAQs
Will property prices rise in 2021?
Chances of prices seeing any upward movement are quite low, at least in the first half of the year, considering the prevailing economic conditions.
Will home loan interest rates fall further in 2021?
As home loan interest rates are already at a record low, the possibility of any downward movement is negligible. Rates may, in fact, be increased once the economy comes back on track, in the second half of 2021.
Will the housing market revive in 2021?
The arrival of a Coronavirus vaccine, along with low interest rates and concessions on stamp duty, could lead to a revival in the housing market in 2021, if there is stability in the job market.
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