The festive season of 2021 is not like any other calendar year for the Indian housing market. As a matter of fact, this is the first year of re-opened markets post the global pandemic. The optimism within the built environment of the Indian real estate is nevertheless palpable. Track2Realty assesses the market realities.
In the cyclic upswing of the asset classes, real estate has thus far not been an active participant due to its sheer investment size. But since the stock market rally has reached its peak, it is anticipated that its sideways movement will make way for other asset classes now.
Will the festive season of 2021 change the course of real estate is something that most of the analysts are curious to see. The festive season has just started and it is too early to guesstimate the exact sales volume & value growth at this point of time. But with a closer look at the Indian housing market one can probably vouchsafe that there are more catalysts of optimism than pessimism. How far this optimism is sentiment driven and to what extent the economic fundamentals support the business take-up is something that needs to be evaluated.
Catalysts of housing absorption
Gradual re-opening of markets & businesses
Property prices are stagnant for the last few years
Key lenders have trimmed home loan rates to 6.5-6.7%
Availability of ready to move inventory promising for the buyers
Festive discount deals by the developers sitting over unsold inventory
Fears of third wave of Covid fading
Over-heated stock market anticipated to correct
What could discourage home buying?
Job market uncertainties
Stagnant salary or salary cut since Covid
Inflation & lesser household savings
Any fresh trigger of Covid 3rd wave
What should the home buyers do?
Property prices are attractive but one shouldn’t over-leverage
Think long-term use of house and not temporary Work From Home
Plunge into home buying if only your job/business is stable
Borrow as less as possible and Debt to Income ratio should not be more than 35-40%
Loan to Value should not exceed 60%
More than festive discounts look for overall value proposition of the property
Aditya Kushwaha, CEO and Director Axis Ecorp points out that the real estate market has had its share of ups and downs post the pandemic and we are banking on the festive season, which starts from October, will bring cheer to the segment. In terms of sales, the year 2021 has been great for the developers. Despite the second wave, there was a 67% jump in sales in the residential real estate sector in the first half of 2021. He believes this momentum will continue in the coming months and there will be a 30-35% jump in sales.
“Factors such as low bank interest rates, stamp duty cuts in some states, demand for larger/spacious homes to accommodate Work From Home have been instrumental in driving sales in this sector. Certain sectors such as holiday homes, luxury homes and affordable housing will continue to outperform. We believe that the luxury housing market and the holiday home market will get a good jump during festive times. However, the mid-segment residential market may continue to be shaky even in the last quarter of 2021,” says Kushwaha.
Vipul Shah, Managing Director, Parinee Group agrees that despite the anticipation of a third wave, housing and commercial real estate sales in the third quarter of 2021 have risen significantly. The gradual reopening of the economy, although has led investor sentiment towards the real estate sector to slowly turn around, it is the festive season that has proven to be the real catalyst for change. The residential sales across top property markets are predictable to witness a sequential rise in the ongoing festive quarter of September to December led by favourable incentives and schemes offered by developers around this time. This, coupled with record-low home loan rates and moderated property valuations, is expected to further revive the demand for residential units.
“The pandemic itself was a key challenge for the housing sector that has created a depreciation for the industry. But as the pandemic is towards its decline the housing market has picked up again. The added benefits of available festive discounts and understanding the value of home ownership has managed to create a deep-seated positive outlook for the housing sector in the current scenario too,” says Shah.
Vinit Dungarwal, Director, AMs Project Consultants maintains that the sales in the housing segment surged 113% in the top 7 cities even as prices rose in the month of September. This momentum is expected to continue in the coming festive season. Not only will there be interesting launches to look forward to but the developers will also be introducing lucrative offers to the consumers. To sweeten the deal, developers will have to offer not just reduced pricing on the properties but also make options available that do not demand a high upfront payment. Another good option would be to offer multiple payment options to prospective buyers.
“There are factors such as the depreciating rupee, low-interest rates on home loans that have contributed to growth in a significant manner. All of these have improved the attractiveness of real estate as an investment asset class against other traditional alternatives. Last year the celebrations were subdued but this year people are looking forward to festivities and this will help drive sales in the real estate sector in a positive manner. Amid the ongoing Covid-19 vaccination drive, discount offers, new residential options and a host of subvention schemes in the market, developers are betting big on the upcoming festive period,” adds Dungarwal.
In a nutshell, the festive season of 2020 was a spoiler for Indian real estate. The base level is hence pretty low and naturally expected to bounce back. Only the post festive season sales analysis would define as to what extent the optimism translated into the purchase commitment. But what could be vouchsafed at this point of time is that even a pre-Covid level sales would be a big bounce back for a sector that has been witness to the prolonged season of festive disappointments in the last few years.
A lot will also depend upon the sales strategy since real estate has always been a push-based market and the biggest challenge continues to be how to lure people towards festive offerings. After all, it is a fiercely competitive market now and the developers need to reinvent to remain relevant for the prospective home buyers.
Ravi Sinha
@RaviTrack2Media
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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