2021 was a year of redemption and cautious optimism for industries across the globe. The steep learning curve of 2020 pushed businesses, especially real estate, to fight back with robust practices and unprecedented digitisation. Despite the contingencies of the second wave and third wave predictions, the sector stood tall and emerged stronger. While the world steadily pivots towards normalcy, it is crucial to take stock of dominant user behaviours and market forces that shaped the realty landscape.
More than just four walls
A prolonged period marked by isolation and uncertainty has had an enduring impact on people and lifestyle choices. While this is evident in consumption habits and spending patterns, the effects are more profound in long-term investments. Homeownership is no longer a mere financial ambition; it offers an unparalleled sense of security and comfort. In a market increasingly becoming end-user driven, there was a distinct preference for reputed builders and Ready-To-Move-In properties that enabled quick possession.
Homes have been recast as multifunctional spaces which serve more purposes than one. Hence, the aspiration for a large, spacious dwelling with convenience-focused amenities has grown universally. Due to the evolving work ecosystems, physical proximity to workstations is no longer a deciding factor for a homebuyer. Consequently, buyers are keen to opt for a quiet and outer city lifestyle tucked away in the suburbs. With health and wellness taking centre stage, the need for natural ventilation, energy-efficient features and access to green outdoors has never been more prominent.
A customer-first approach
Accelerated digitisation was the strongest armour for developers across the market. While technology was pivotal in bridging the gap between builders and end-users, it also helped democratise homeownership for a larger population.
Since virtual tours and paperless transactions dominated the buying journey, building trust was a strategic imperative. Customer experience became the fulcrum and the measure of success of real estate transactions. To stay ahead of the curve, developers had to anticipate the buyers’ needs and render offerings that would cater to their present and future expectations. In parallel, builders were also tasked with navigating the rising raw material prices.
An overview of the market
The residential real estate segment has witnessed an unprecedented rise over the last 20 months. In the wake of burgeoning demand, decadal low interest rates, conducive government policies and an aggressive vaccination campaign, the sector is positioned for scale higher. According to JLL India, home sales rose more than 124% y-o-y to 32,358 units in the seven leading cities. Furthermore, between January 2021 and September 2021, private equity investment inflows stood at US$ 3.3 billion.
The impressive recovery of the real estate sector in 2021 is further evidenced by increased market consolidation and the booming realty stocks. Some of the biggest players have gained 40%-110% year-to-date. This is also indicative of the market’s growing trust in the industry.
The road ahead
While 2020 was arguably the year that brought businesses to a standstill, 2021 could set things in motion. Real estate was one of the first sectors to effectively distil lessons from the pandemic into actionable strategies. The residential segment, especially affordable housing, will gain prominence in the market. The government continues to push this through various tax incentives that benefit the customers and developers. Non-apartment segments like plotted developments are also likely to garner the attention of investors.
The real estate industry will become more organised in line with accelerated market consolidation, structural and policy reforms, and heightened demand for branded developers. The housing sales are expected to reach pre-COVID levels. Consequently, prices are set to appreciate by 5-10%, according to an ANAROCK report. The sector is also positioned to see increased PE investments.
As developers map out their operations to stay relevant, they must adapt fast to changing customer aspirations. This would include but is not limited to reduced energy-efficient residential design, customised offerings, sustainable construction practices, digital solutions, and convenience-led features. It is also vital to weave transparency and credibility into every step of the homebuying journey. As we step into a new era of real estate, building customer and stakeholder trust is paramount.
(By Ashish R. Puravankara, Managing Director, Puravankara Limited)