There are enough and more indicators pointing to the fact that India’s residential real estate sector is making a strong recovery post the setbacks caused by the Covid-19 pandemic. While a recent JLL report talks about a 51% surge in home sales, on a sequential quarter basis, another report by NoBroker.com argues that 82% of the tenants it surveyed across the country are ready to own a home. And there are good reasons for it.
“Developers are offering discounts of between 7% and 15% (this includes the selling price, payment schemes, and freebies all put together). And home loan rates are at a 15-year low,” says Ramesh Nair, CEO and country head, India, JLL, the largest professional services real estate firm in the country.
Instead of subduing the purchase sentiment among home buyers, the pandemic only seems to have strengthened it. And this is especially true for millennial customers. “In a shift away from the ‘never settle’ lifestyle, [they] are realising the value of owning property as an important physical asset that ensures financial security,” says Saurabh Garg, co-founder and CBO, NoBroker.com, a peer-to-peer real estate portal.
However, these positive sentiments may well be short-lived. “We have also seen that when developers stop giving discounts, suddenly the sales stop,” says Nair. “It’s a pure value-for-money market.” Pretty much like the aviation sector: when airlines increase ticket prices, demand plummets.
Post the Union government’s Demonetisation drive in 2016, the residential real estate market has been down in the dumps with property prices remaining stagnant over the last four years. Of course, the setting up of the Real Estate Regulatory Authority in each state and the IL&FS crisis played their roles in keeping prices under check. But between 2011 and 2016, residential real estate prices had shot up by 41% on an average across the country.
“There is a good amount of supply right now in the market and only when the supply dries up will prices start going up,” argues Nair. Various reports peg the unsold inventory across the top seven real estate markets of the National Capital Region, MMR (Mumbai Metropolitan Region), Pune, Bengaluru, Chennai, Hyderabad, and Kolkata to be about 640,000 residential units.
The pandemic-induced work from home culture has certainly changed what people are looking for in a home, which is now more than just a dwelling space.
Now, in the October to December period, amid the varied offers and discounts, the top seven cities in India reported sales of about 50,900 residential units, rebounding to almost 86% of the sales in the corresponding period of 2019. “MMR and Pune drove residential sales, with the two cities accounting for over 53% of the total share (in sales),” says Anuj Puri, chairman, Anarock Property Consultants.
A limited-period stamp duty cut of 300 basis points in Maharashtra was the reason for MMR and Pune to take a lion’s share of the sales, with investors across India and West Asia taking advantage of this offer. Not surprisingly, luxury property sales saw a significant jump.
“In such a scheme, the value of benefit is directly proportional to the size of one’s investment. This scheme allowed investors to save up to ₹6 lakh on a property worth ₹2 crore,” says Shajai Jacob, CEO—GCC, Anarock Property Consultants. As compared to 2019, though, the consultancy firm reports that the top seven real estate markets in the country reported a 47% decline in sales.
That said, the pandemic-induced work from home culture has certainly changed what people are looking for in a home, which is now more than just a dwelling space. The demand is for “larger, multifunctional homes” says Anjana Sastri, director, marketing, Sterling Developers. People who earlier wanted a 2-BHK or 3-BHK home now wanting an extra room, driven by the study room concept for a work from home setup. “There is a definite urgency among customers to upgrade their living standards, owing to the changing work-life conditions. This has resulted in a faster pick-up of ready-to-move-in inventory in the affordable luxury and premium luxury segments,” says Kamal Khetan, chairman and managing director, Sunteck Realty Ltd.
Nair of JLL adds that buyers are also opting for projects with terrace gardens and open areas. People also want to move towards suburban areas and are looking at plotted developments. Where state governments failed to draw up plans to decongest Indian cities, the Covid-19 pandemic seems to have done it by changing consumer home buying preferences. “The events of 2020 have already shaped the years to come; at least 2021 and 2022 in terms of real estate demand, sales trends, and overall industry practices,” says Khetan.