Affordable housing to drive realty growth in 2021

December 16, 2020 1:35 PM

The market is promising, and with the apex bank being optimistic about the economic growth, the real estate sector would see a marked change in 2021.

In terms of credit availability, 87% of the Q4 2020 survey respondents believed that the funding scenario would either improve or continue to remain the same over the next six months.In terms of credit availability, 87% of the Q4 2020 survey respondents believed that the funding scenario would either improve or continue to remain the same over the next six months.

2020 started on a positive note with the real estate sector hoping to improve upon the mix bag performance of 2019. The first heartbreak came when the Union Budget 2020-2021 almost neglected the real estate sector, barring some good tidings for the affordable segment. The sector took respite in the government’s focus on infrastructure, which would mean opening up of peripheral areas and creating new avenues of growth. Then came the global pandemic, leaving everyone clueless. However, during the lockdown, the sector pulled up its socks to minimize the impact, and also made its voice heard by the Government of India.

Realizing the gravity of the situation, the Government of India came out with a slew of measures and announcements over a period of six months that helped the real estate sector stay firmly on ground. The government granted an extension to complete projects, funds to ensure liquidity, steps to help stuck projects, rationalized risk-weightage norms, announced the restructuring of loans based on the projects, and linking home loans to LTV.

Reeling under liquidity crunch and lack of activity in initial lockdown months, the sector utilized digital platforms for communicating with the buyers. The impact was immediate as buyers, who were sitting at homes and had ample time at hand, realized the importance of owning a home. The digital outreach programmes resulted in increased inquiries, and quite a few developers of repute booked units using online channels. The year saw rainfall when it comes to using digital, innovative schemes, and lucrative offers.

The affordable housing segment, on the other hand, survived the onslaught merely because it caters to the price bracket that has maximum demand. Several factors worked in favour of affordable housing, including Rs 3.74-lakh crore liquidity infusion announced by the RBI on March 27, 2020, the CLSS extension announced in May, relief under EPF, etc. The biggest takeaway for the buyers, however, was the unprecedented cut in the repo rates, which resulted in home loan interests coming down to sub-7%. The tragedy also came as a blessing in disguise for the sector, especially the affordable housing segment, as the middle class was facing challenges in staying at rented accommodations.

The sector made a comeback in Q3 with sales and new launches rebounding to almost 70% of the pre-COVID-19 levels. Maximum sales were seen in the Mumbai Metropolitan Region (MMR), National Capital Region (NCR), and Pune; all three regions accounted for almost 80 per cent of the sales in the July-Sept quarter. The reduction of stamp duty charges in Maharashtra followed by Karnataka coupled with developers’ incentives and all-time low home loan interest rates became the catalyst of recovery for the real estate sector. Though new supply in NCR was not much, it still contributed almost 15% of the overall launches that happened this year. The affordable housing segment comprised almost 70% of the total new supply in the July-Sept period in major cities.

The market is promising, and with the apex bank being optimistic about the economic growth, the real estate sector would see a marked change in 2021. The measures taken by the RBI would help the sector reap rich dividends as the sector is riding high on the increased demand in the post-COVID-19 situation. 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.

(By Pradeep Aggarwal, Co-founder & Chairman, Signature Global, and Chairman, National Council on Affordable Housing, ASSOCHAM)

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