YEAR 2021 NEW PERSPECTIVES NEW ASPIRATIONS

<b>LITERALLY AND FIGURATIVELY, THE REAL ESTATE SECTOR HAS BEEN THE TALK OF THE TOWN THIS YEAR. REFORMIST POLICY ANNOUNCEMENTS, PROGRESSIVE RATE CUTS, ALL TIME LOW HOME LOAN INTEREST RATES, </b> <b>REMOTE WORKING OPENING UP NEW RESIDENTIAL MARKETS AND SURGE IN FIRST TIME HOME BUYERS DEMAND HAV

BY Realty Plus
Published - Feb 1, 2021 4:40 AM

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LITERALLY AND FIGURATIVELY, THE REAL ESTATE SECTOR HAS BEEN THE TALK OF THE TOWN THIS YEAR. REFORMIST POLICY ANNOUNCEMENTS, PROGRESSIVE RATE CUTS, ALL TIME LOW HOME LOAN INTEREST RATES, REMOTE WORKING OPENING UP NEW RESIDENTIAL MARKETS AND SURGE IN FIRST TIME HOME BUYERS DEMAND HAVE PUSHED NEW BOUNDARIES. LET’S TAKE A LOOK AT WHAT YEAR 2021 HAS IN STORE. By: Sapna Srivastava The year 2020 was very challenging marred with global recession, the after effects of which will continue in 2021 and full economic normalization will take several quarters yet. Experts agree, the recovery will be uneven across industries and in case of real estate even across asset classes. Infrastructure and real estate form the backbone of economic development. Both figure prominently among the 26 sectors that have been granted the Emergency Credit Line Guarantee Scheme (ECLGS). The loans extended under the ECLGS scheme will play a pivotal role in accelerating the revival, protecting jobs, and boosting employment generation. The relaxation in financial and technical specifications for bidders of national highway projects under the hybrid annuity model (HAM) and builds, operate, transfer (BOT) mode will provide further fillip to infrastructure development. In addition, multiple measures were announced in 2020 to bolster real estate sector. States are aggressively investing in infra projects to propel housing, commercial and industrial property markets. The liquidity boost to NHB and the SWAMIH fund have been a shot in the arm of ailing real estate sector. On its part, RBI initiated massive repo rate cut of 140 bps leading to the lowest home loan interest rates in over 15 years. Other, positive initiatives were the six-month moratorium on EMIs and restructuring of loans of real estate companies at the project level. Some states also announced stamp duty reductions to support sector. During 2020, the government initiated several reforms aiding both the demand and the supply side. Affordable housing will continue to gain traction led by the extension on interest of affordable housing loans, as well as the renewed rigor of the Pradhan Mantri Awas Yojana. As the economy recovers in 2021 and the employment level inches up, the real estate sector will see an uptick in demand. HDFC Chairman Deepak Parekh believes the spurt in demand for real estate in the last few months is a result of record low interest rates, affordable prices and supportive government policies among other factors. “All of us here are mindful that the country still faces an immense shortage of quality and affordable housing. Yet this goes to show that with supportive government policies, adequate availability of resources and supply of rightly priced homes, the demand for real estate and home loans will continue unabated.” THE RESILIENCE OF REAL ESTATE Going by the industry data, the trend indicates that the residential real estate sector in India is looking at a revival in this year. Bengaluru, new launches witnessed an increase of 281% to 4,220 units from 1,109 units and the absorption Increased by 16% to 3,188 units from 2,747 units. Delhi NCR region saw an increase of 8% to 2,300 units from 2,136 units in new launches. Chennai absorption increased by 3% to 1,042 units from 1,008 units while, in Hyderabad the absorption increased by 24% to 2,573 units from 2,071 units. In Kolkata, new launches witnessed an Increase of 120% to 491 units from 223 units and the absorption increased by 15% to 1,004 units from 876 units. Likewise, the Mumbai Metropolitan Region witnessed an increase in new launches by 50% of 6405 units from 4,267 units and the absorption increase by 35% to 11,236 units from 8,312 units. Pune too had increase in new launches by 7% to 3,931 units from 3,684 units and the absorption increase by 13% to 5,472 units from 4,824 units. A Knight Frank report predicts the commercial yields in Mumbai, Bengaluru, and NCR to remain stable in 2021, indicating the resilience of this segment. The implementation of REITs has streamlined the process of investment in commercial real estate and the attractiveness of the REITs listed in India vis-à-vis global counterparts imply that commercial realty will continue to be on investors’ radar in 2021 as well. Buoyed by political and economic stability, thrust by the government, and restoring of confidence, the outlook for the commercial realty is positive in 2021. The infrastructural push and redevelopment of public amenities will further push the economy onto a higher trajectory. Monetization of land and upgrading amenities and infrastructure in cities beyond the metros are among the viable pathways to unlock India’s growth potential in industrial, warehousing & logistics and data parks segments. Furthermore, the land redevelopment will create independent economic engines across the country, leading to the generation of employment and have a cascading impact on industries such as tourism and hospitality that had been hit by the pandemic. It will also augment the revenue stream for government undertakings. “Land redevelopment in areas that were previously underexplored or need critical infrastructure is also likely to generate interest from businesses that are looking for new avenues to expand their footprints, such as real estate developers and commercial service providers. The process of upgrading runways at airports and redevelopment of stations has already begun. In fact, the station redevelopment program itself is being seen as a huge opportunity by the prospective developers. The New Year will accelerate the process with the discussions around the formation of an apex authority to attract investment in the pipeline. The development of the first multi-modal hub in Assam, the proposed logistics hub and a datacenter park will also have a multiplier effect on the economy, added “Ved Parkash Dudeja, Vice Chairman – Rail Land Development Authority . INVESTMENT FLOW IN REALTY Despite the short-term disruptions, India's commercial real estate sector continues to attract interest from occupiers and investors looking at the long-term horizon. As per a report by Savills India, PE investment in the Indian real estate sector may garner inward flow to the tune of $6 billion in 2021, up 30% YoY. The improvement in the economic scenario, boosted by positive reform initiatives, will back the growth. Warehouse leasing is expected to increase by 60 per cent in 2021 as compared to 2020, keeping investors riveted. The rate cuts in home loans, attractive offers by lenders, builder discounts and reduction in stamp duty charges in Maharashtra and Karnataka, are the reasons homebuyers are planning to invest in properties. Surprisingly, there has also been a sizeable jump in homebuyers' budget. SHOULD YOU BUY HOME IN 2021? The answer is resounding – Yes. The home loan interest rates are the lowest in more than a decade. This coupled with the interest subsidy under PMAY can bring the effective interest rate below 5%, which is marginally higher than residential rental yield (3%-4%). In other words, for certain types of properties, the rental amount can pay for the interest part of the loan, which was not possible even a year before. In addition, some states have initiated premium and stamp duty costs bringing down the cost of projects. The developers in a rush to liquidate inventory for cash flow are offering ready to move units at attractive prices and discounts. What’s more, the recently approved affordable housing amendment policy allows changes to the size of housing projects, car parks and an increase in the commercial component of the project areas, making affordable housing projects more attractive for buyers. As per industry experts, the good times will not stay for long, the real estate prices will very soon hit the upward trajectory. As the new launches have been few and far in between, the supply of ready projects is limited. The raw material and labor costs are shooting so as the cost of availing finance by developers. All these unavoidable factors will add up to the costs of the projects and not to mention, government relief for homebuyers and developers are for a limited period only. WHAT TO EXPECT IN 2021 Year 2020 was a strange year. On one hand was the recession and wage cuts, on other was the all time high buyer’s interest towards owning property. If we are to believe the analysts, 2021 will be a strange year too. Businesses have learned to work with employees working remotely and the trend is going to continue. The movement to the tier II cities will create newer realty growth hubs and will drive demand for the connectivity and social infrastructure. Migration to more affordable housing in suburbs is already catching on and 2021 will see more people moving away from expensive housing. Adaptive reuse and redeveloping of unwanted real estate into a different type of commercial real estate that better serves current and future market demand, will undoubtedly be the flavor of the year. In many ways, the global pandemic has accelerated the demand for industrial space, warehouses and distribution centers as well as data centers.