Need for Bigger Homes Driving Residential Realty Demand
While real estate and construction remained the most impacted sectors in India in H1FY21, there was some buoyancy during H2FY21, with the economic activity reviving. Measures such as a reduction in the stamp duty in Maharashtra, lower interest rates, pent up demand and a halt in launches provided some relief to the realty sector. However, the green shoots that had started becoming visible were short-lived as the second wave of the pandemic hit the nation unawares and much harder, according to a research report by Brickwork Ratings. Owing to the accelerated vaccine programme adopted by the government, it is now subsiding, and hopefully the problems inflicted by the pandemic should subside soon. While Q1FY22 is expected to be a near washout for most real estate players, the pace of sales is expected to gain traction in the remaining part of FY22, with launches by various marquee players. Increased discounts, freebies and attractive/flexible payment terms in addition to benign interest rates and regulatory measures are expected to boost sales for real estate players, albeit only H2FY22 onwards. A key role here, expectedly, is going to be played by the affordable housing space. Residential real estate has been facing challenges for some time now and is expected to see some traction going forward. With the extension of the work-from-home and online education culture, there is an increased need for larger homes, especially for families with working couples. Residential project sales, which had picked up towards end-Q2FY21, only to slow down in April and May 2021, are expected to witness recovery from the lower base recorded in H1FY21. While negative sentiments led to reduced discretionary spending, resulting in the postponement of buying decisions, the need for safer and bigger homes could actually result in increased demand for residential real estate. The sector is also expected to witness increased home buying from the final/end user rather than investors. Additionally, with prolonged work-from-home for corporate employees, some reverse migration towards tier-2 and tier-3 cities is expected, which may lead to real estate demand gaining traction in these cities. Notwithstanding the gradual increase in home loans outstanding for banks since FY17, the y-o-y growth rate has seen a declining trend since FY20, partially owing to a weak buyers’ sentiment due to the economic slowdown, followed by the pandemic impact. The same trend was observed in the house price index. However, concerns around weak demand and high inventory levels were offset by renewed interest in the sector from FPIs due to the low interest rate regime and expectations of a near-term revival.
Tags : News/Views residential Maharashtra construction Affordable Housing Stamp Duty Government home loan Brickwork Ratings Bigger Homes