YEAR 2021 NEW PERSPECTIVES NEW ASPIRATIONS

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.