When you've been down and out for too long, the only way forward is up. India's real estate industry is finding this out to its sweet surprise now.
Indian realty's troubles were already acute when COVID hit two years ago—a slump which affected it from around 2012 only got accentuated by the likes of RERA, demonetisation, GST and then the slowdown which hit the nation's economy since 2018. So when Covid and lockdown came in in the summer of 2021, it seemed like the last nail on the coffin. Unsold inventory ran into thousands of flats, shells of incomplete projects dotted the landscape, especially in regions like Noida, and it didn't help that there was a spate of cases against many developers ravaging the industry, forcing even the government and the Supreme Court to step in.
But surprisingly, two years into COVID, Indian realty seems to have found its groove back, in the unlikeliest of saviours—the invisible virus itself.
Vaibhav Jatia of Rhythm ResiTel, a leading property developer in western India calls 2021 "the boom year", and many of his fellow property entrepreneurs agree. Niranjan Hiranandani, the billionaire vice-chairman of the National Real Estate Development Council (NAREDCO) and managing director of the Hiranandani Group puts it all down to resilience, before listing out the reasons realty boomed in 2021, “Accelerated vaccination drive, softening on home loan interest rates, buoyant capital market, liquidity infusion, highest FDI and market consolidation were the key highlights of 2021.”
So what exactly happened? The move by some state governments to cut stamp duty for limited periods to spur money flow post-COVID also helped, as it is believed to have prompted investors who had ditched realty over the last several years to make a comeback. One statistic proffered by Puravankara, one of the leading realty firms in the country puts it in perspective. When COVID-19 struck, the company, which operates in Kochi, Chennai, Bengaluru as well as the Mumbai-Pune belt, was stuck with 4.5 million sq feet of unsold residential inventory.
“Today it has come down to 0.4 million square feet!” says managing director Ashish R. Puravankara.
Home loans, at one point of time as high as 12 per cent, is now going at around 6.5 per cent following RBI's cutting of repo rate. “Banks are also attracting borrowers by way of offering additional discounts like home loan processing fee waivers. Housing affordability is one of the key reasons that property prices see an uptick and consumers intrigued to go-ahead for a purchase,” said Farshid Cooper, MD of Spenta Corporation, a Mumbai-based developer.
“The incentive announced by the government and lower interest rates fueled demand and additionally the lockdown made many people realise the importance of space,” added Cooper. “Realtors have surpassed expectations in the last nine months!”
“Covid has brought a new perspective to the home buyers, the importance of owning one's own space with all amenities,” explains Puravankara. “It's a fundamental shift.”
What has been even more surprising has been the slow but slow upward trajectory of prices. In tune with the 'new normal' trends of people wanting to buy ready-to-move-in flats with all amenities built-in, the upwardly mobile opting for plots or independent floors, as well as new trends like design innovations like flexi-spaces, home automation and sustainability quotient, have been a willingness to pay more money to get what you want.
This has seen hikes in many markets, especially for ready-to-move-in projects. Puravankara, for example, hiked prices by 10% for projects nearing completion, while the increase has been lesser for those in earlier stages. Explains Ashish R. Puravankara, “Bengaluru continues to be extremely strong, Kochi stable, Chennai is strong (while) the top performer would be Pune-Mumbai region.”
Mumbai metropolitan region (MMR) has seen some high ticket transactions as well as a boom in middle-level transactions, in a way spurred by the stamp duty cut announced by the Maha Vikas Aghadi government. “The overall Mumbai market saw a substantial uptick,” said Cooper of Spenta. Adds Shrikant Shitole, President CREDAI – MCHI-KDU & managing director, Tycoons group, “In the coming quarters, we foresee a steady price appreciation of properties, as the vacant inventories have reduced.” His tip for MMR? Thane-Kalyan-Dombivali cluster and the Navi Mumbai region, where prices are expected to shoot up in the next quarter.
Northern India's boomtown Gurgaon (Gurugram) has also seen a steady pick-up rate when it comes to residential real estate, even if this is primarily a commercial hub. “Apartment rates in Gurugram have increased by 5-7% post-Covid,” pointed out B.K.Malagi, CEO and board member of Experion Developers. The rate of growth is even higher for independent plots in Gurgaon—as much as 12 per cent.
“Similarly in tier-2 markets like Lucknow (UP) apartment prices increased by 5 per cent while plot prices in Amritsar (Punjab) have seen an 8 per cent increase on account of rising consumer demand,” he added.
With such renewed interest, real estate majors are looking forward to a boom time in 2022, but will the new Covid variant play spoilsport?
“Omicron has raised concerns...and (India's) real estate market is keenly observing the development but has not demonstrated any panic so far,” feels Cooper of Spenta.
“The belief is that with the level of vaccination and other learnings the country had during the past two waves would help us deal with the situation better if any outbreak happens.”