It was a double negative for residential real estate in April 2021, especially in Maharashtra, with a strong drop in new home registration numbers clubbed with lockdown like restrictions that impacted sales.
In the previous quarter of January to March 2021, housing sales nearly reached pre-Covid levels supported by low-interest rates on home loans and reduction in stamp duty by the Maharashtra government. However, the emergence of the second wave of Covid 19, removal of concessions and the subsequent semi lock-downs in many areas has slowed down this pace of home sales in the second quarter. The situation continues with developers being hopeful of sales revival with the drop in Covid 19 related infection numbers, which has already started to happen.
Manish Joshi from Newsbarons connects with Dhruv Agarwala, Group CEO – Housing.com, Makaan.com and Proptiger.com; who informs ‘Driven by last year’s lockdowns, the sector has made great strides in embracing digital marketing and sales technologies that has allowed it to be more resilient during the second wave of infections and associated lockdowns’.
NB: Registrations, especially in Maharashtra, escalated during the last 2 quarters due to government support and got impacted post April post removal of concessions. How do you see this market moving in the coming quarters.
Dhruv: The concessions were needed to help shore up the real estate sector by inducing sales and registrations in a period of great uncertainty. Had it not been for that, things could have panned out badly for the sector. April saw a double negative because of the resurgence of COVID and the removal of the concessions. However, after having experienced a bounce back of sorts after the first wave of COVID, consumers feel more confident that things will return to normal once the second wave ebbs. Additionally, during COVID, the importance of owning a home has been reinforced. Residential real estate buyers are now looking for projects that provide them extra space and offer multiple amenities within the development. Keeping these factors in mind and given that interest rates continue to remain at historically low levels, I am optimistic that the market would bounce back strongly over the coming few quarters.
NB: If restrictions continue, would there be an impact on pricing? Do you believe developers will consider rate correction to influence sales.
Dhruv: Prices have stayed stable in most of India’s residential markets over the last few years. When we look at the numbers for the first calendar quarter of 2021, we can see that prices have remained relatively stable as compared to the same quarter in the previous year. Prices have risen by 3% on average, with price increases ranging from 1% to 5% in different parts of the country. All of the major cities followed the same pattern, except for the Mumbai Metropolitan Region, where prices remained unchanged on a year-on-year basis.
Despite COVID, I do not see big rate corrections happening in the near future. However, many developers are offering freebies such as no EMIs for a year, subsidies on stamp duty, and other such incentives to tempt homebuyers, resulting in an effective reduction in pricing or increased affordability for home buyers. The same pattern is likely to continue in the near term to boost sales and to induce fence-sitters to buy. In some areas, a small number of developers may even provide modest price discounts but that will not have any substantial impact on overall prices in the market.
NB: How do you see sales moving currently across the top 8 cities.
Dhruv: As per PropTiger’s Jan-Mar quarterly report, home sales in India’s eight prime residential markets have increased by 12% in the January-March quarter compared to the October-December quarter of 2020. However, a slowdown in sales is inevitable in the April-June quarter across all segments due to the second COVID wave. Nevertheless, once the COVID situation improves, the residential market is likely to recover quickly. The July-December period this year is likely to be far better than the same period last year unless we witness a third wave of COVID.
NB: From an investment perspective, which segment holds strong growth potential and higher ROI.
Dhruv: The largest share of the pie in the real estate sector has always been the affordable and mid-segment. From an investor’s point of view, these two segments offer a better ROI as compared to the luxury segment, which people mostly buy for self-use. Price appreciation is more likely to happen in the affordable and mid-segment, offering better returns, because the demand in that segment is growing the fastest.
NB: What consumer trends emerged during the last 1 year of Covid.
Dhruv: During COVID, the importance of owning a home has been reinforced. Additionally, demand for bigger homes that can accommodate a Work-from-Home (WFH) scenario has gone up. In the luxury segment, people are looking for wellness projects or projects that provide excellent health facilities or amenities within the development.
Also, homes in Tier II-III cities and homes on the periphery of big cities have witnessed an increase in interest from both buyers and investors as remote working becomes part of the new normal. Interests in townships, which are self-contained, have also gone up as a safeguard against lock-down situations in the future.
NB: High rate of unemployment and continued lockdown like restrictions have impacted residential RE? What measures should the industry expect from the government.
Dhruv: The sector has been vociferously talking about the government facilitating the availability of funds to help it tide over the challenging times. Priority lending and industry status to the sector has also been a long standing demand. However, considerable support has come from the RBI with interest rates being maintained at historic lows and also from the government in terms of tax rebates on interest on home loans for affordable homes and in the form of stamp duty cuts by state governments.