Could this be the best of times to buy a house? Despite all the pall and gloom that COVID-19’s economic impact may have caused, India’s real estate sector is coming around to see the sparkling silver lining as well.
Housing real estate players in the country, to their pleasant surprise, have discovered that the market has not tanked the way they thought it would. The reasons are not far to seek—prices have rationalised to perhaps the most sensible in a long time, while home loan interest rates are at their lowest in more than a decade.
“A correction in (prices) made purchase of home across all major (Indian cities) highly attractive. Large volume markets like Bengaluru, Mumbai and Pune saw year-on-year revisions of 1 per cent, 3 per cent and 5 per cent respectively,” says Knight Frank in its latest report, ‘India Real Estate: H2 2020.’
Real estate players, diffident for years when it comes to price cuts, also seem to have come around to realising the writing on the wall. As Ankit Kansal, co-founder and managing director of the property firm 360 realtors, points out, “The developer fraternity also introduced attractive payment plans to arrest any steep decline in sentiments.”
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The pandemic has also re-configured middle-class Indian expectations and trends. Work-from-home, for example, seems to have directly improved the prospects of sales of flats and housing units in smaller towns. “The year also witnessed the movement of people towards tier II and III cities, thereby increasing the scope of real estate far and wide,” says Vimal Monga, vice president (sales & leasing), TDI Infratech.
“People also realised they needed larger homes, with work-from-home, and children attending online classes from their homes. Those realisations did help people take decisions,” says Madassir Zaidi, executive director (North), Knight Frank India, adding, “Affordability has increased, the index is at its decadal low.”
Local rules like Maharashtra’s slashing of stamp duty for property registration also seems to have done wonders. For example, while the growth in housing units sale in the October to December period was 84 per cent nationally, Mumbai and Pune recorded higher than average growth—at 193 per cent and 143 per cent respectively—according to Knight Frank. Home buyers, it is clear, rushed to take advantage of this limited period opportunity, as the slashing of stamp duty by 300 basis points was only for four months, from September to December. As Rajani Sinha, chief economist and national director (research), Knight Frank India, points out, “Interestingly, Maharashtra’s revenue collection from registration has picked up, implying that pick-up in housing sales has more than compensated for the lower stamp duty.”
In fact, total figures show that a sharp increase in sales post the lockdown has taken housing sales to pre-COVID levels by the end of the year. Despite new home launches being much lower last year compared to 2019, sales figures recovered to almost 100 per cent during the recent festive months, at more than 61,000 units according to Knight Frank India. Maximum sales were in the mid-segment of flats/units costing Rs 50 lakh and above.
While the decline of 40-45 per cent compared to previous year exists, realty seems excited at the uptick, during the last three months particularly, as it seems to project positive sales trends. Ankit Kansal of 360 Realtors puts it in perspective, “Once the lockdown was suspended, markets started reviving, despite a slowdown in business activities weighing on the overall economy. Finally, in the last quarter, the previous year’s growth numbers were restored, and the industry reached near normalcy.”
“I feel developers will not increase prices (for) now, it’s a question of survival,” analyses Zaidi of Knight Frank India. “They have land and projects, but cash flow is a problem. For that they have to increase the sales. Right now it is the time to (do that)).”
That would be good news to prospective home buyers, as there are hopes that the upcoming union budget could also have something to boost spending. “Affordable housing is very likely to get another booster shot,” feels Anuj Puri, chairman of Anarock Property Consultants. “However, the budget also needs to focus on the larger market as more than ever before, homebuyers and investors need focused tax incentives to get mobilised.”