REAL ESTATE OUTLOOK 2021

THE YEAR 2021 WOULD REQUIRE REAL ESTATE TO REIMAGINE THE WAY IT  HAS OPERATED SO FAR. INDUSTRY EXPERTS SHARE THEIR VIEWS ON HOW  THE REAL ESTATE STORY WILL UNFOLD IN 2021.  Harshavardhan Neotia, Chairman, Ambuja Neotia Group, “The pandemic may, in 2021, affect buyers' preferences in terms of choice of real estate: larger layouts with higher safety, hygiene, and captive amenities may find more takers. In terms of commercial real estate, satellite offices in non-conventional micro markets are likely to be a new asset category.  Vacancies in retail are already in decline and an increased uptake of the same is to be expected throughout 2021. 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. In summary, with a slew of economic and policy reforms and stimulus packages introduced by the authorities, the sector will have a positive outlook in 2021 increasing the demand for good products from reputed developers.”  Neeraj Bansal - Chief Operating Officer - India Global,  KPMG in India, “On the back of several factors including  liquidity infusion by RBI, relief under EPF and reduction  in home loan rates, the residential segment is expected  to gain traction from both developers and buyers. India is  likely to witness further penetration of flexible workspaces,  throughout 2021 and beyond. With businesses exploring  co-working spaces to hub-and-spoke models, the de densification of office spaces is expected to become an  imperative in near-to-medium term. India's real estate  market is now witnessing an upsurge in tech-enabled  developments. The adoption of new-age technology tools  is likely to become a permanent feature of the industry in  2021 and beyond.”  Rohit Gera Managing Director, Gera Developments,  “There are clear signs of demand coming back to the real  estate sector. Whether this is a sustainable bounce back or  pent up demand will be revealed in the months to come.  The reduction in interest rates multiplies the increase in  affordability and with the number of new projects going down, home buyers today have far less to choose from.  This has contributed to people accelerating their decision  to purchase their homes. While these are all positives, the  structural problems of high leverage, outstanding debt and  stagnant projects has still not been addressed. Developer  margins have been eroded on account of additional  interest burden and overheads payable through the  lockdown."  Pradeep Aggarwal, Co-Founder & Chairman,  Signature Global and Chairman, National Council on  Affordable Housing, ASSOCHAM, “The market looks  promising for the current year as 2020 has been very difficult year for people. Those waiting to invest are looking  at the year with positivity. Though things have been  delayed but nothing is derailed from the path. Especially,  the market for affordable housing is robust, and in the  coming months, there will be more movement. People have realized the importance of owning a home, and this  feeling is going to persist.   C N Govindaraju, Managing Director, Vaishnavi  Group, “The industry will see a large scale consolidation  thereby restricting the industry to a few good builders  that deliver quality products on time. Secondly, the  construction industry will have to start embracing new  technologies like precast that assures timely delivery and  exceptional quality. Most importantly, the industry will  take up a transparent customer-centric approach to build  the confidence levels of the customers to make substantial  sales at the project commencement stage as well.”  Anshuman Magazine, Chairman & CEO, India,  South East Asia, Middle East & Africa, CBRE. “In these  extraordinary times, RE stakeholders across sectors have  an opportunity to structurally reimagine their strategies  to ensure sustained recovery. Doing so would require  shifting from traditional approaches and embracing new,  transformational methods — which would be accelerated  by widespread tech adoption, sustained policy impetus  and accelerated investor interest across RE in India. We  believe that with stakeholders becoming increasingly  interconnected and dependent upon one another, they  would need to jointly develop their RE strategies going  forward. Overall, we expect demand for real estate to  remain robust and the sector to emerge resilient in the  future.”  YEAR 2021 FOR VARIOUS ASSET  CLASSES  Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure  Ltd, “One of the biggest changes that is already happening  is consolidation in the real estate space. While some of  India’s developers face difficulties in raising funds, the  bigger, more established and well-funded players have  either taken over or are assisting in the completion of  stressed projects. Going forward, we can only expect this  trend to continue and provide much-needed structure  and streamlining to the real estate sector in India. Buyers  are now keen to buy from reputed developers or ready  projects. In the coming years, digital infrastructure is likely  to enable sales considerably. A major transformation is  taking place in the way real estate companies evolve and  adapt to ‘the new normal’. This includes dealing with  situations like the work-from-home scenario, change  in consumer behavior and digitalization of company  processes, amongst others. The Covid-19 pandemic is  compelling the industry to look at wellness as a major  priority area of building design and construction.”  Bijay Agarwal, Managing Director, Salarpuria Sattva  Group: “The pandemic has changed our long-held  opinions on real estate and how we used to perceive it.  One of the primary outcomes of this pandemic, has been  an increasing desire for risk mitigation by real estate  developers. Another interesting development with respect to the commercial segment was the successful listing of  India’s second office REIT during this pandemic. We can  expect tailwinds for this asset class continuing in 2021 as  well. The residential segment can gain even more traction  with themes like inventory funding, last mile funding and  affordable/mid-market housing. Besides residential and  pure commercial real estate; warehousing, co-working  spaces and data centres will be in the limelight in 2021.The  demand for both residential and commercial real estate is  expected to grow in the next 6 to 12 months.”  Ravi Ahuja Head Commercial Business, L&T Realty, “After a 56% drop in office net absorption in 2020 v/s 2019,  the outlook for H1 2021 is expected to be different than  that for H2 2021. Cities such as Bengaluru & Hyderabad  are expected to be most resilient followed by Mumbai  & Pune. The residential space has seen a spurt in recent  activities due to government concessions, reduction in the  interest rates, etc. To ensure sustainability of activity levels,  policies enabling affordable prices for end users is a must.  Infrastructure connecting satellite towns with metro cities  will decongest large metro cities.”   Harshavardhan Neotia: “There is going to be a change  in how people think and live. The buyer sentiment will  definitely be impacted. Job insecurity, reduced salaries,  savings and business volumes have all disrupted cash  flows to the real estate business. On the positive side, the  real estate sector has been quick to respond to changes  and adapt to new technologies; this is apparent in the  digitisation of so many processes. Democratisation of  newer platforms and the offering of newer investment  avenues has brought about massive shifts in investment  preferences that will continue to outlive the pandemic.”  REALTY SECTOR’S ISSUES THAT NEED  ATTENTION  C N Govindaraju: “The government should start  addressing the cartelisation of the cement and steel  companies. These materials have a direct bearing on the  cost of construction and thereby the cost of the finished  project. It can be detrimental to the real estate sector if left  unaddressed. The government should look at a reduction  in levies/taxes until the end of FY 2021-22 to support and  revive the industry from the pandemic slow down. Make  money available on both fronts - customers and builders/ developers. Aid a speedy bounce back through a waiver in  the registration fee waiver for FY 2021-22.”  Sanjay Dutt: "Several cash positive projects in the  industry are stuck largely due to lack of capital and  with no fault of developers. The cost of Governance,  Compliance, Capital and State Government delays has  made real estate unviable for many. We have made  representations to the Government to initiate measures  to improve developer liquidity - reduce provisioning  requirements for loans to real estate sector, flexibilities offered to the Banks in respect of moratorium, deferral, the customers. The more we tailor make our offerings and  address issues of concern; more relevant we shall become.” Pradeep Aggarwal: “Single window clearance, Input Tax  Credit, and industry status to real estate can provide a fillip  to the economy. The government also has to ensure that the  measures are implemented faster without getting stuck at  state or authority levels. A timeline to clear various issues  has to be put in place to ensure smooth functioning.” Ravi Ahuja: “Lessons from 2020 suggest revival of tier  2, 3 & 4 locations. Creation of smart cities require public private partnership models, with long term cheap funding  sources. The government should promote the concept  of ‘Special Residential Zones (SRZ)’ with social and civic  infrastructure support including education, entertainment,  hospitals, hospitality, community welfare, wellness etc.  Special tax benefits to ‘’Special Economic Zones’’ riding  on employment creation as a priority objective should be  promoted by Government Policies. Incentive to further  strengthen the creation of Cold Storage and Mobility of  Frozen Products across geographies will ensure equilibrium  in prices and control inflation.”   Harshavardhan Neotia: “I am hopeful to see relaxation  in income tax norms, single-window clearance and  GST reforms and easing of the liquidity issues. Am also  optimistic that the government would give ‘industry status’  to the real estate sector as a whole including secondary  housing and holiday homes. Hike the Rs 2 lakh tax rebate  on housing loan interest rates under Section 24 of the  Income Tax Act to at least Rs 5 lakh to generate healthier  housing demand. Personal tax relief, either by tax rate  reductions or amended tax slabs, GST waiver for under construction homes, even for a limited period will push  demand for under-construction homes. Developers are  unable to get funding from major banks and NBFCs at  affordable cost. They need a rational capital flow to keep  up the supply pipeline.”  Bijay Aggarwal: “Developer has limited resources  to acquire land with 100% ownership. The alternate  course is joint development on area basis and revenue  sharing. Since the implementation of GST on T.D.R is being  interpreted for application of GST on transfer of right to  develop the land. Due to this amendments, most of the  projects either residential or commercial has reduced  significantly. Relaxation on GST for joint development  transaction on T.D.R, will be a huge relief for developers.  The government should also consider allowing input of industry status to the real estate sector will further boost  low-cost funds, cut capital costs and make land acquisition  easier. To speed up project execution, a single-window  clearance system can aid.” EXPECTATIONS FROM THE BUDGET 2021  J.C. Sharma, Vice Chairman and Managing Director,  SOBHA Limited, “Customer experience has emerged as  one of the most important trends in our business. People  are demanding higher safety standards and are concerned  about their productivity, efficiency, and connectedness  with the world outside from the confines of their home.  Creating digitally enabled business models have suddenly  become the norm. The future of real estate will depend on  the integration of high-grade efficient delivery of personal  mobility, housekeeping, wellness, provision of walking and  cycling tracks, payment of maintenance and other fees,  digitally enabled grocery, milk and newspaper delivery and  other necessary concierge services like payment of user charges, hailing a cab, postal and courier services with high  quality living spaces made aesthetically and thoughtfully.  All this is possible with the use of intelligent data and  analytics which can provide personalised experiences etc. should also be passed on to NBFCs. GST input credit  should be allowed for residential and commercial, allow  FDI in ready to move in residential inventory. Subvention scheme for real estate should be restored, interest rate  subsidy of 3% for all buyers of residential units for a  period of 3 years, state stamp duty on registration should  be 2% only across all states, remove capital gain and  allow deduction of the interest paid to bank from rental  incomes of houses. Provide stimulus through taxation  measures - increase limits under section 24 b, set more  distressed funds, abolish GST on JD Agreements, GST  on cement should be reduced from 28% to 12%, allow  de-notification of IT SEZ partly or fully or allow domestic  rupee earning businesses to operate out of existing IT SEZ  without any restriction..”    BUDGET EXPECTATIONS 

1. Income Tax holiday for Developers in  Affordable Housing was given for 2020.  It would be encouraging for developers  to get this rebate for another 2 years.  
2. Banks should provide Project based  (land & construction) funds at 6%. 
3. For first time homebuyers (in Affordable Housing) stamp duty  exempt is required pan India. 
4. Technology import for construction of  affordable housing from other countries  should be free from custom duty. 
5. Stamp duty for land purchase in  affordable housing should be reduced  or removed for next few years to  promote the launch of such homes. 
6. GST on material and services used in  affordable housing should be reduced  to 50% or brought to a single digit. 

Sanjay Dutt: "The government should introduce measures for course correction, like granting industry  status to the real estate sector and a single-window  clearance mechanism for faster completion of projects.  One GST, One or No Stamp Duty regime across States are  some of the other recommendations. The government  needs to introduce reforms for affordable housing, joint  development and encourage foreign investment. Another  major problem that needs to be addressed is liquidity in  real estate. REITS are a viable solution for they enable  investors to diversify their portfolio. An investment of  up to Rs 50,000 in REITs should be allowed as deduction  under Section 80C. Increasing the deduction for interest  on housing loan to at least Rs 5 lakh and GST waiver for  under-construction homes would also help in boosting  the demand”  Neeraj Bansal: “At present, there are varied GST rates for different types of properties such under construction,  affordable and non-affordable housing properties, which  often lead to increase in statutory cost of the property.  At the same time, the on-going labour shortages and low  offline sales have led to pilling of unsold inventory. To  accelerate demand among buyers, it would be ideal if the  government streamline the GST rates and reduce stamp  duty charges, at least for the next one year. Difficulty in  accessing finance from banks/ NBFCs and lack of long-term  cheap finance for large projects has been one of the key  challenges for the Indian real estate sector. While currently  only affordable housing has been granted infrastructure  status, providing the status to the entire sector could  unlock lower borrowing rates, increase the flow of foreign  and private capital and benefit the overall sector.