A pandemic is not easy on anyone. But it is when things get truly difficult that we get to discover what we are truly made of. If I were to talk about what the COVID crisis revealed about the nature of the real estate industry, I would say that it revealed a spine made of steel and a soul made of concrete! As an industry, real estate has demonstrated remarkable resilience and we are expecting a robust real estate performance in the coming year. Let us analyze the trends, factors and key ingredients of the real estate forward march in the forthcoming year.
Homebuyer is the king
The coronavirus pandemic was a sudden blow to society at large. And while it led to an inevitable and unprecedented slowdown in site visits, what also happened is that the human population as a whole suddenly realized the importance of home. When the whole world went into lockdown mode, people realized that their home is their first and best defence against the vagaries of the outside world. People started working from home, kids started studying from home… and everyone realized that they now had new expectations and new requirements from their home. They needed more space, they needed better planning, they needed homes that were complete lifestyle solutions.
The real estate industry responded magnificently. And new projects were designed and launched, keeping in mind the changed needs of buyers, keeping the home buyer at the centre of all planning and designing. This, in addition to attractive schemes such as deferred instalments, reduced down payments, EMI holidays, free furnishings of the houses, stamp duty payment by the developer and group discounts are expected to continue in the new financial year. After all, the pandemic is not over yet, and the home buyer should make the best use of the amazing opportunities to grab a home that is designed around his needs and made easy to own because of all the incentives.
Low home loan interest rates
The period of the Coronavirus crisis was also the period of historically low home loan interest rates. The Reserve Bank of India continuously maintained the accommodative stance and kept the REPO rates as low as 4.25 percent. It had a direct bearing on the housing loan disbursements, and the home loan interest rates remained low.
The home loan rates of most of the public and private sector banks remain in the range of 6.50-9.50, and it is quite affordable for the middle class, which makes up the major chunk of new home buyers in India.
With restrictions easing up and site visits restarted, the home buying trend is certain to pick up, and the housing finance rates will remain affordable in the next financial year. But, a word of caution to home buyers – people are buying fast, so, your wait and watch policy could prove detrimental to you; your dream home is not going to wait for you for long, there are far too many people who are also after it.
Handsome Return on Investment (ROI)
One fact is clearly evident. The housing demand is on the rise and growing rapidly. If the latest report of CBRE, i. e. India Market Monitor is considered, sustained attractive mortgage terms and government incentives are driving the housing sales tremendously. The housing sales surged 46 percent QoQ to 50,000 housing units in the third quarter of 2021 (Q3 2021) and a solid 86 percent on a YoY basis. Therefore, despite challenges and upheaval due to the pandemic, the residential sector has shown great resilience and will continue to achieve heights in the coming financial year.
This trend of robust and recovering demand will ensure a noticeable return on investment as residential prices are bound to surge in the near future. For example, if someone invests Rs 1 crore in the real estate sector of any of the top eight cities of India, an overall ROI of 25-30 percent can be expected comfortably.
Price rise inevitable
The challenges posed by the coronavirus to the Indian economy were like a chain reaction. The input cost in the construction sector increased due to rising prices of fuel, steel, bricks, and cement etc. Input costs have surged by over 20 percent in the last couple of years.
This fact can be reinforced from the recent Housing Price index by the RBI, which has revealed that all India HPI recorded a 2.6 percent growth YoY in Q2 2021, as compared to 2 percent in the previous quarter.
Moreover, the recovering demand has also led to the clearing and sale of ready stocks by leading developers. This will also provide a chance to the real estate fraternity to increase prices. Experts believe that a price hike of 10-15 percent is inevitable in the housing markets across India.
Housing for All
The flagship mission of the Indian Government, Pradhan Mantri Awas Yojana (PMAY) is culminating in the year 2022. Therefore, this financial year will remain dedicated to the rollout of the affordable housing schemes and making the provision for low-cost homes. Real estate developers engaged providing affordable housing will get cheaper loans and other rebates. In addition to this, the lower middle class to economically weaker section (EWS) of the society will have more housing options as the government is encouraging new housing technologies, which have brought down the cost of housing units significantly.
Best time to invest
If real estate analysts are to be believed, this is the best time in a decade to invest in real estate. With prices at their lowest and a supportive finance mechanism, there must not be any more deference in the decision to go for a buy. We must also caution that this rosy period may not last long as once the market is fully recovered, the prices will soar, and homebuyers might have to shell up to 30 percent more money than present-day prices. If you have waited for long, this is the time to invest.
In conclusion, the real estate market is on the boom, and the market conditions are making it all the more attractive. While it was justified to wait and watch in the pandemic period, it is no more judicious. Take advantage of the low-interest rates, the lucrative schemes, the great new designs and buy your property. Make 2022 the year of turning amazing opportunities into fantastic decisions!
(Dr. Atul Goel, is MD, Goel Ganga Group & President (Elect.), NAREDCO Pune)
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