2022 may well be the year of many indecisive “what ifs” in the minds of average home buyers. Whether the new normal post Covid is temporary or permanent would define the housing demand ahead. Track2Realty decodes the dilemma of the home buyers.
Case Study 1: Deepak Srivastav bought an apartment in Goa in June 2021. When Work From Home is the predominant reality of the IT workforce, it made sense for him to shift away from the maddening Bengaluru crowd and settle at a place that had always been his dream destination. However, by the end of November he had a shock when his office was partially opened and all the employees were mandated to at least report to the office twice a week.
Case Study 2: When Manish joined his new job with a US-headquartered company that had its India office in Pune, he was all set to shift from Noida over there. But the pandemic put his plans on hold and the company invested for his Work From Home set-up in Noida. He too had plans to buy a property in hometown Lucknow and settle over there. Fortunately for him, before he could take a plunge his office is now open and expects the workforce to report to the office.
Case Study 3: Carried by the popular narrative of bigger homes being the need, Suresh Prabhakar bought a 3BHK apartment in Gurugram post Covid. He had to stretch his budget quite a bit at a time when he was expecting a salary hike. Everything changed in the next few months and while many of his colleagues faced furlough, he too had to accept a 40 per cent salary cut. With his Debt to Income Ratio getting higher, all his plans went haywire. As fate had it, even the property that he had bought has depreciated in the last one year and selling it off is not an option.
These real life case studies on the eve of 2022 clearly demonstrate that there is a ground reality in the housing market that is juxtaposed to the industry narrative that suggests:
This is the best time to buy a house
With borrowing cost at all time low people are eager to buy houses
Property prices are at the rock bottom
People need bigger houses for Work From Home
Reverse migration of talent pool fueling property markets of smaller cities
This industry narrative serves well to the stakeholders who for some strange reasons believe that narratives sans market fundamentals would goad the business to a fairy tale year in 2022. They continue to refuse to acknowledge that 2022 is going to be the year of many “what ifs” for the prospective home buyers.
The home buyers have multiple issues to address after having learnt some very tough lessons in the last two years. They continue to question very many “what ifs”:
What if I lose my job in today’s uncertain job market?
What if my salary is cut and I can’t serve the EMIs?
What if I buy a remote house and my Work From Home profile is reversed?
With inflation rising what if my Debt to Income ratio gets into uncomfortable zone?
What if property prices depreciate and my Loan to Value is skewed?
2022 won’t be an easy year for the average Indian home buyer in terms of making a conscious decision of buying a house. The fundamentals of the market and macroeconomic outlook indicates 2022 could be even more challenging than 2021 for more than one reason. The rising input cost of construction has put a serious question mark over the feasibility of the business in a price sensitive market. Many of the developers with thin profit margins are facing a catch-22 where the input cost hike is compelling for escalation but the demand side is not ready to absorb the hike.
Privately many of the developers admit that they are left with two very uncomfortable options ahead – either to hike the price and face even slower sales or else compromise with the construction quality to compensate with the hiked input cost. Another challenge for a large universe of the developers is to attract the buyers and finance into their new launch projects. 2022 may be witness to few and far between new launches.
The power of brand, that was till recently not that important in a business where demand far exceeded supply, would be even more critical in real estate now. The K-shape recovery after Covid has been witness to the fortunes of the leading realty brand in general and listed players in particular.
In contrast, home buyers are really apprehensive with the smaller realty players, even if they offer competitive pricing. 2022 is expected to phase out some of these smaller struggling brands. Already, the large players are bullish to take over these not-so-branded players.
Many developers high on land bank and low on financial closures are realizing that land bank is a land liability today. 2022 may hence be witness to many plotted offerings by the developers to liquidate the land parcels.
The housing market per se has to weather the headwinds due to buyers’ many “what ifs”. How people would like to live, work & play in a housing complex is just evolving at this moment and hence indecision at the beginning of 2022. Moreover, the trend of overseas property buying by the wealthy Indians is not something that bodes well for the luxury developers in this part of the world.
Reverse migration was expected to fuel the housing demand in Tier II and III cities. However, with no clarity over the long-term feasibility of Work From Home, it is actually putting pressure on the rentals of Tier I cities, as the migrant workforce has temporarily shifted to their hometowns. No one can vouchsafe whether 2022 would answer these indecisive dilemmas that confront the housing market.
Last, but not the least, the high inflation & low job market growth has put a serious question mark over home buying in the year ahead. There are many attractive deals available in the secondary market today and one can only keep the fingers crossed with the possibility of large-scale distress sale in the housing market.
An interesting year with many “what ifs” ahead!
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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