Housing affordability is at a peak at present, with stable home prices and low interest rates playing a supporting role, Housing Development Finance Corporation (HDFC) chairman Deepak Parekh said on Thursday. The real estate sector has deleveraged and unsold inventory levels have also come down, Parekh said, speaking at an event organised by the Confederation of Indian Industry (CII).
“In over 50 years of my work life, I have not seen housing affordability better than where it is today in India. I have not seen such easy liquidity conditions and interest rates at such low levels, and I have not seen such a burning desire to be a homeowner than in these current times,” Parekh said.
In India, demand for housing has come from genuine homebuyers, not speculators, according to Parekh. Home prices have stayed fairly stable, low interest rates have helped and the real estate sector has already self-corrected and recovered from its previous down-cycle. “The Indian real estate market is on an upward cycle, which bodes well for us,” he said.
The big star of the real estate sector continues to remain residential housing. “I hardly need to reiterate that the demand for housing in India continues to remain extremely robust,” Parekh said, adding that the greatest mark of confidence has been the strong pipeline of new launches, surpassing pre-pandemic levels. The demand for housing continues to come from first-time homeowners and those moving up the property ladder, generally into larger homes or houses in other locations.
“The trend one is seeing is that incomes are rising faster than real estate prices and therefore affordability should not get impacted,” Parekh said. In certain high-end premium projects, there has already been a price rise of 15-20%. Barring a few metro cities, prices in the affordable housing segment have been stable. The sweet spot for housing is still in the price range of `50 lakh to `1 crore, he said.
There is now greater confidence to opt for under-construction properties, at least with those developers who have a strong track record of delivering projects on time as opposed to only a preference for ready-to-move-in properties. So even if certain pockets across the country witness a small price uptick, this can be absorbed, Parekh said.
“What one needs to closely watch out for is, if there is a continued rise in the costs of building materials, which could get passed on to the homebuyer,” Parekh said. Measures that can lessen this impact include facilitating shorter construction cycles, ensuring faster approvals and enabling credit input on goods and services tax for under construction properties.
Parekh said at the start of the pandemic, some segments of the real estate sector were already reeling from a liquidity crisis. “Reflecting on the state of the housing and real estate sector today, to my mind, this sector has demonstrated remarkable resilience. The stronger players in the real estate sector have increased their market share. There has been greater consolidation which was much needed,” he said.
Deleveraging has happened across most of corporate India, including in real estate companies, and endeavours of asset monetisation have worked well. Unsold inventory levels have come down. Niche and stressed assets funds are seeing increasing opportunities in India and recent regulations by the capital markets regulator on special situations funds, too, are favourable towards this end, Parekh said.
Fresh supply of office space across the major metro cities is expected to be in the region of 45 million square feet this year and an estimated quarter of this new supply is already pre-leased. Rentals have so far been fairly stable, but there could be a slight uptick in certain premium projects, Parekh said. “Today, riding on the back of India’s strong IT capabilities, new real estate opportunities are emerging, which is the growing demand for data centres. In the recent Union Budget, data centres have now been accorded infrastructure status. This in turn would facilitate increased access to credit at more favourable terms.”
Parekh also spoke of the emergence of two key trends within the real estate landscape — proptech and ESG. “Construction technology is at an exciting juncture with 3-D printing, building information modelling, pre-cast construction technologies, amongst others. The second aspect that calls for increased focus is ESG. It is important that the construction sector in India stays ahead of the curve especially on working towards a lower carbon footprint and reduced emissions,” Parekh said. The sector has to be able to demonstrate greater efforts towards increasing the stock of green buildings, he said.