While it is too premature to announce that the sector has recovered, it would not be erroneous to declare that the housing market has bucked the economic storm with aplomb and is poised to remain strong as we head into the new year.
Early in 2020, the Indian real estate sector was enjoying a cautious recovery, with its momentum picking up briskly amidst a renewed fervour. And then, without any inkling, the pandemic swept across the nation, changing the whole panorama, and cratering the expectations of realtors.
It did not take much time for the property sector to comprehend the ruthlessness of this biological storm as its physical machinery went for a toss, housing sales nose-dived to almost 80% in Q1 & Q2 2020 and construction activity came to a standstill, with a pandemic-induced nationwide lockdown. Key sectors like automobile, hospitality and tourism took a fair share of the blow throwing the economy into a tailspin, as its GDP contracted by 23.9% in Q1 2020 and 7.5% in Q2 2020.
While the economy unlocked in phases, financial crisis, piling unsold stock and flagging consumer sentiments, brewed the perfect storm for consolidation. Increasing supply constraints, migrant crisis, international trade restrictions and immobilized citizens also pulled the plug on the residential realty sector – the primary driver for India’s real estate growth.
Looking at flagging fortunes of the real estate sector and the ‘Housing For All’ mission deadline nearing, the Government of India pitched in with financial stimulus and incentivisation measures to haul the realty sector out of the abyss.
Government stimulus fuelled red-hot homebuying activity
The reduction in stamp duty rates on transaction of immovable property to the tune of 2-3% by states like Maharashtra and Karnataka has perked up the mood of the realtors and jolted the realty sector back into motion as it helped developers to sell inventory and liquidate stocks that have been lying idle for months.
The extension of CLSS (Credit Linked Subsidy Scheme) for affordable housing from March 2020 to March 2021 with a liquidity boost of Rs 70,000 cr, last-mile funding of Rs 20,000 cr for stressed developers and an additional outlay of Rs 18,000 cr for PMAY, also brought the much needed relief to the flaccid property sector.
In addition to that, proactive government measures in the form of moratoriums, tax cuts, construction premium cuts and project timeline deferrals, helped sow green shoots of recovery for the property sector.
As per industry reports, Q3 2020 saw more than 35,000 affordable housing units sold across top 7 cities, an increase of 85% from previous quarters and sale records of most real estate developers touched 80-90% of pre-covid stats. The supply side saw 19,865 units launched during the three-month period, a 58% QoQ increase, out of which 43% came from the sub-Rs 45-lakh price bracket.
Digital prowess opened a new realm
With gradual easements and increased sector buoyancy, real estate developers digitized their business modules to increase resilience and enable business continuity. This digital leap was a revelation for realtors as they could connect with homebuyers, drive transactions with convenience and make use of a limitless playground to showcase their inventory. Realtors signed accords with digital realty platforms like Square Yards to make homebuying simple, hassle-free, credible and transparent. It was a whiff of fresh air for homebuyers too as they interacted with a myriad of properties leveraging digital knickknacks like 3D walkthroughs & virtual tours and transacted seamlessly with multiple payment gateways and digital signatures.
Constant feedback from consumers about this neo-homebuying experience helped developers to invent new business strategies that sync with the current consumer preferences and create the perfect alibi for the physical counterpart.
Housing sales across tier 1 markets shot up to 2x levels QoQ and new projects got sold out in two weeks, something that was last seen during pre-Covid days.
Looking at how this celluloid-like contactless homebuying experience resonated perfectly with homebuyers, realtors spent exponentially on an array of tech solutions, inducted digital tools and prepped themselves to the core to tackle the changing environment of the sector and expectations of the consumers.
Consumer confidence on a high as key sectors snap back
While it’s true that the pandemic has accentuated the importance of owning a home bringing a larger sense of security, realtors witnessed higher demand this time since real estate investment became easier and more affordable, thanks to rock-bottom home loan rates, stunning payment plans and property price corrections.
The economic turnaround of the nation with key sectors like agriculture, automobiles, FMCG and consumer durables displaying strong recovery figures during Q3 and improving the 2022 growth forecast to 19%, on the backdrop of policy reforms and relief, fiscal & monetary measures by the government, also played a stellar role in restoring calm and confidence in homebuyers.
It augured well for the real estate market too as fence sitters trooped back to cash in on the once-in-a-lifetime opportunities at play. Buyer sentiment improved significantly in Q3, turnaround time between enquiries and conversions on online portals got reduced and people started to look at homebuying as a necessity rather than a luxury. Renewed buyer interest helped developers clear existing inventory and come up with better options that tally with the changing housing demands of homebuyers.
Despite the seemingly adverse economic conditions, the real estate sector has had a record-breaking performance with unsold inventory taking a dip in Q3. A silver lining which deserves mention here is the fact that India, which was not an investor market for real estate, has slowly started moving in that direction as buyers take advantage of low prices conjured up by the pandemic. While it is too premature to announce that the sector has recovered, it would not be erroneous to declare that the housing market has bucked the economic storm with aplomb and is poised to remain strong as we head into the new year.
(By Kanika Gupta Shori, COO and Co-founder, SquareYards)