Year 2021 started off very positively for Mumbai Real Estate. On the back of an uncertain 2020, the state government announced a reduction in stamp duty from 5 percent to 2 percent from October to December 2020 and 3 percent from January to March 2021. This gave the demand for Mumbai Real estate the much-needed boost it so desperately needed.
A 2020 report by Knight Frank India found that the whopping 60 percent reduction in stamp duty by the Maharashtra Government resulted in a two-fold increase in the registration of residential properties in Mumbai in December 2020, amounting to 18,854 units. This trend continued into the first quarter of 2021.
Realty bounces back
Coming off a difficult 2020 with numerous people losing their livelihood, many had spelt doom for the real estate sector. Further, with the NBFC crisis still looming large, many expected liquidity for the sector to further dry up. Additionally, most expected that new home purchases would fall off significantly and even receivables from already sold homes would slow down, thereby creating a significant cash crunch for developers.
While the sector did witness a lot of these phenomena between April and October 2020, it bounced back faster than anyone had expected. Certain uncertainities resurfaced due to the second wave of the COVID-19 pandemic between March and May 2021, but these were quickly put to rest as the depth of the Mumbai real estate market came through in the months that followed.
More space required with WFH culture
During 2020 and the peak of the lockdown, people were forced to adapt to a work-from-home (WFH) culture and realised the need for more space. Many also moved from joint to nuclear families for this reason.
The partial opening up of the economy in 2021 as well as the widespread vaccinations meant that most had learnt to accept and live with the vírus. Fear and uncertainty were quickly replaced by cautious enthusiasm. This shift in mentality for most Mumbaikars also had a huge role to play in the the revival of the sector.
A recent ANAROCK Q1 2021 report clearly indicates that sales in the housing sector in the top seven cities have surpassed last year’s figures during the same period by almost 29 percent at 58,920 units. This is significantly higher than even pre-COVID levels, which indicates that the sector is well on its way to recover from last year’s losses.
However, despite the general recovery of the sector, it is pertinent to note that there has been a shift is consumer preferences, especially with regard to the two factors highlighted below.
1) Preference towards branded/reputed developers
More than ever before, homebuyers prefer to deal with branded/reputed developers. These are developers who have a track record of quality and timely delivery. This difference is even more prominent when considering under construction properties. It doesn’t stop at consumers. This trend contines even with bankers, contractors and other ancilary industries that work closely with the sector.
2) Preference towards Ready-to-Move-In (RTMI) homes
Homebuyers today are looking to invest in RTMI homes despite the differnetial pricing. This gives them a sense of security and clarity. Further, the savings made in GST offset some of the pricing differnce between a RTMI and under-construction home.
What lies ahead?
While concerns over the third wave of the COVID-19 pandemic loom large, we can take assurance from the continued fast pace and scope of vaccinations. This may reduce the impact on the economy should there be an outbreak like the second wave.
Currently, the government seems better prepared to deal with pandemic. We may, consequently, avoid any large-scale lockdowns that proved devastating for the economy last year. The homebuyer confidence in Mumbai’s residential market is also expected to stay strong as we see recovery across the board.
Pandemic reaffirms importance of owning property
Buying a house is the ultimate life goal for many and this pandemic has reaffirmed the importance of owning property. This need shall continue to propel sales and will, hopefully, lead to home prices firming up.
The extension of fiscal benefits through governmental policies coupled with the continuation of soft interest rates by the Reserve Bank of India (RBI) can make home loans easily accessible and affordable. Further, discounts and stress on better facilities and amenities by developers will keep buyer traffic strong in Mumbai.
The government can further help to boost demand in the market by reducing stamp duty and lower the repo rate, which can then be passed on to aspirational buyers.
(Farshid Cooper is MD, Spenta Corporation)
