Ever since the lockdown was imposed in March 2020 with Coronavirus scare at its peak, it seems the built environment of the Indian real estate is experiencing the Placebo Effect. The Placebo Effect is when an improvement is observed, despite an individual receiving a placebo as opposed to active medical treatment. In medical fraternity, it is estimated that 1 in 3 people experience the placebo effect. It seems every stakeholder, barring the home buyers, is experiencing the Placebo Effect in the property market.
Sentiment nevertheless mean nothing if it is not well supported by the facts & fundamentals. The ground reality is something that everyone knows but does not want to admit. All eyes are on 2021 and the new year is anticipated as the year of turnaround in the property market. The expectations of the built environment of the Indian real estate is what Vladimir Lenin famously quotes, “there are decades where nothing happens; and there are weeks where decades happen.” Will 2021 actually be the turnaround year for the Indian real estate?
There is no denying that in terms of the sentiments the Indian real estate has completed its Fear, Hope and Greed cycle in the year 2020. Starting with Fear after the Coronavirus hit economy forcing the lockdown, gradual lifting of the lockdown led to some spike in the sales fueling the hope, and then by the end of the festive season it turned into a misplaced greed cycle.
The big question today is whether we are witness to a transition from hell year to non-hell year. Or the year 2021 could only prolong the pains and frustrations of the real estate market. A simplified version of Quantitative Easing (QE) would suggest that there are multiple catalysts to goad the sector to better performance in 2021. It is hence believed that the investors have evaluated their cost & benefit of putting money into the Indian property market. A number of PE deals, even in the at present riskier segment of office space, is cited as the evidence.
Catalysts of expected better performance
Ready inventory
Price cut
Policy incentives
Lower borrowing cost
Expected friendly budget
Fresh investments (PE/REIT)
Tier II cities growth with WFH
Segments like Warehousing & Data Centers mushrooming
However, what the QE does not define is the fact that the euphoric investor sentiment is more often than not the end of the Bull Market, to take an analogy from the stock market. There is a school of thought that believes going forward there are reasons to have a cautious outlook. The present buying spree is a phase of panic buying and post April 2021 there could be a period of slowdown. Real estate might be a sentiment driven business but realism borne out of job losses and salary cuts could easily crash land the euphoria.
Industry Optimism
Hiral Sheth, HOD – Marketing, Sheth Creators asserts that the lockdown itself has been a major catalyst of change in 2020 for real estate. Fence-sitters have realised the importance of owning a property and have taken the plunge. The differential between rental yields and interest rates has narrowed over the years, thanks to lower interest rates and property prices in many Indian markets.
“Reliefs like stamp duty rate cut, availability of easy payment schemes like 10:90 or 20:80 schemes, and waiver of GST, etc. have revived buyers’ interest in real estate investment resulting in good transactional activity, especially during the festive season. Ready-to-move-in properties are in great demand and thankfully due to the available inventory, this demand is being met easily,” says Sheth.
Aditya Kushwaha, CEO & Director Axis Ecorp is of the opinion that Government’s corrective announcement and on-ground activation of schemes like Housing for All, record low rate of home loan, relaxation on Stamp Duty in few states, economic package, Atmanirbhar Bharat Abhiyan, Revision on FDI Policy, Repo rate & inflation control have been instrumental in giving a much-required impetus to the real estate industry.
“Due to global uncertainty, the possibility of NRIs coming back to India is high, and we have observed that they are willing to invest in real estate to utilize savings. Amid the pandemic, the overseas investment in the Indian market has also significantly grown owing to the fall of Indian rupees against the US dollar. NRIs are considering Indian real estate as the most sensible investment option during COVID-19,” says Kushwaha.
Deepak Goradia- Vice Chairman and Managing Director, Dosti Realty says that the pandemic has managed to alter the way we live and work. With new emerging trends, the property market is not going to be the same in a post-pandemic phase. An evolved demand and supply dynamics indicates that the sector is in positive territory. Homebuyers are understanding the significance of having real estate, as an asset class in their investment basket, as a more dependable option offering stable returns. Government measures like reduced Stamp Duty and repo rates have further helped the trend to materialize.
“With offices planning to adopt Work From Home for a long-term basis, many prospective homebuyers are considering shifting base to the peripheral areas and investing in homes at more affordable prices. The concept of budget-friendly homes has marked a strong place for itself in the property sphere. The Finance Minister’s announcement for increasing the duration of the credit-linked subsidy scheme (CLSS) under PMAY by one more year has positively impacted affordable housing during these tough times. Also, the easy availability of home loans from financial institutions at a subsidised rate of interest has improved sales of the housing unit,” says Goradia.
Beyond the Placebo Effect of the Indian real estate sector, the fact lies that the panic buying post the lifting of the lockdown is more or less over. The year 2021 would be hence a cautious year, unless the economy is back on the growth track. Property being the high value transaction and life’s costliest purchase is not attracting the average salaried class due to uncertain job market and salary cuts.
It is to be seen whether there would be opportunistic buying by the investors in the year ahead. What is even more important is to assess whether there would be more distress sales in the secondary market, affecting the sales volume of the developers sitting with optimism.
Next: Track2Realty pan-India survey on the buyer sentiment in 2021
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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