Last two years have seen a resurgence of the home and the value people attach to it. There has been a secular cycle for residential real estate in all segments. The uptrend in the luxury housing market has continued beyond the first quarter (January-March) and into the second quarter (April-June), which is a further indication of the strength of the market, says Amit Goyal, CEO, India Sotheby’s International Realty.
In an exclusive interview with Sanjeev Sinha, Mr Goyal shares his views on the post pandemic trends in the housing market and gives his perspective on the luxury segment. Excerpts:
It’s been more than two years now since Covid started disrupting the entire world. What has been the demand, supply and price trend during these two years?
It is true that life’s greatest lessons are usually learnt at the worst times. During the Covid-induced lockdown, people across the globe realised the value of a home. Everyone wanted to upgrade if they could afford to. Space became the most sought-after luxury, to accommodate a home office, study rooms, gym, and entertainment, and the demand for green, open-to-sky homes skyrocketed.
Not only did demand for bigger and spacious homes increase within cities, but there was also a significant rise in demand for holiday homes and second homes in places like Goa, Alibaug, Manali, and Dehradun. Demand for farmhouses and independent villas on the outskirts of a city rose significantly.
We had a reasonable supply when Covid started in the most upmarket zip codes in demand by UHNIs. However, ready inventory is now shrinking and we have a supply constraint in some of the top micro-markets of top cities and Goa. On prices, there was some correction in the first two months of Covid, when there was a complete lockdown and no sales were happening. Since then, prices started recovering and presently in many luxury localities, property prices are 15-20% higher than the pre-Covid level.
How tough was doing business during these testing times? What new ways, methods and tools have you adopted to conclude the transactions?
During the first Covid wave, property transactions came to a near-halt when the nation went into a complete lockdown. Restriction on movement, social distancing norms and cautious buyer sentiment translated into negligible home buyers in the market. Even after the restrictions were eased, very few people were ready to freely come out with their family for property visits.
With more and more people working from home, we at India Sotheby’s International Realty took this period as an opportunity to leverage their availability. It was an ideal time to reach out to potential leads that did not convert in the past. We also got enough time to reach out to our past customers database for references. The approach helped us generate good numbers of potential homebuyers who were planning to buy. However, homebuyers were wary of visiting properties and offices.
Thanks to technology, we were able to facilitate potential home buyers with video walk-through and other similar methods for the virtual tour of the property and the locality. Besides that, we used 3D pictures, slideshows and others to make it as real as possible.
Further, we actively used apps like google meet and Zoom call, to set up virtual meetings with clients, initial negotiations and so on. Almost, the entire sales process was online. However, we also faced challenges in closing the transaction as most of the government offices had limited the number of document registrations that could be done in a single day.
Is demand back to the pre-pandemic level or is it still lagging behind?
Actually, demand has surpassed the pre-Covid level significantly, especially in the luxury housing segment.
We at India Sotheby’s International Realty clocked Y-o-Y growth of more than 30% consecutively for the last two years – 2020 and 2021 — and we expect to close another strong year.
How has the recent increase in the interest rate on home loans impacted demand in the luxury housing market?
RBI’s decision to hike the policy rates after more than two years was not surprising given the immense inflationary pressures we are seeing.
We don’t see much impact of increase in home loan interest rates on luxury housing demand. Even after recent increases, home loan interest rates are still low and home buyers should make use of it. Real estate as an asset class is always a preferred investment to park savings in during inflationary times.
What is your perspective on the real estate market in India, especially the luxury segment?
Last two years have seen a resurgence of the home and the value people attach to it. There has been a secular cycle for residential real estate in all segments. We have seen a big upsurge in demand for bungalows in posh colonies of metros or farmhouses in the suburbs from top corporate executives, businessmen and start-up founders who have done exceedingly well on their equity ownership portfolio. The uptrend in the luxury housing market has continued beyond the first quarter (January-March) and into the second quarter (April-June) which is a further indication of the strength of the market.
As per our Luxury Outlook Survey, one-fourth of HNIs bought property during the pandemic. An overwhelming 67 per cent of those surveyed said they were keen to buy a residential property in 2022, citing lifestyle upgrades and a good investment opportunity as their top reasons. In fact, in the NCR market, we at India Sotheby’s observed about a 40% rise in demand post Covid in the luxury segment. Villas, farmhouses, plots, and independent floors are in high demand. We expect this to be a cyclical up move and demand should improve further in the second half of the year 2022.
How about property prices? Do you expect them to go up?
There’s no other way for house prices to go, except up. We all know, in India home prices stayed almost flat between 2015 and 2020. Post the first wave of Covid, prices have started inching up and all good developers have been able to raise the prices of new launches by 5-7%. Now it’s inflation which will push up prices. The cost of construction materials – steel, cement, pipes, tiles, and electric fittings – has also risen between 20% and 60%. Then there’s the embedded cost of rising oil prices – with oil flirting with 100 dollars to the barrel.