2020 had been a tough year for the Indian residential market as the first wave of the pandemic had brought everything to a standstill. Nevertheless, all industries — including the real estate sector – emerged from the nationwide lockdown in 2020 with a valuable sense of resilience, damage-limiting skills and a new way of envisioning the business environment – especially in terms of technology adoption.
As such, confidence at the beginning of 2021 was high and real estate developers as well as brokerages were well-prepared to face any possible future disruptions.
According to an ANAROCK study, in 2020, 1.28 lakh units of new residential supply were added across the top 7 cities of India, while sales were clocked at 1.38 lakh units. From the previous peak of 2014, supply was down by 77% and sales were down by 60%. This large-scale decline indicated that the Indian residential market had bottomed out in 2020 and was likely to enter a long-term upcycle from 2021 onwards.
“Reviewing the overall performance of the Indian residential real estate market in 2021 shows a definite upswing. Between Jan and Sep 2021, 1.63 lakh units of new residential supply were added across the top 7 Indian cities – 27% higher than 2020 full year supply – and 1.45 lakh units were sold – 5% higher than in the whole of 2020. While this depicts a cumulative trend, the Indian residential real estate sector’s comeback after the 2nd wave in Q2 2021 was phenomenal, sharp V-shaped one,” says Anuj Puri, Chairman, ANAROCK Group.
In 2021, a bull run was witnessed not only in real estate stocks but also in the broader market. Ample liquidity targeted the stock markets on the back of satisfactory ROI expectations. The arrival of the Omicron strain towards the end of 2021 has slowed this movement to some extent; however, mid-to-long term prospects remain highly positive as COVID-19 has been reined in to a large extent in India, and most businesses are back on track.
“Overall, real estate stocks boomed in 2021 as developers garnered good sales and were actively launching new projects. After the 1st wave, the real estate sector’s recovery was pronounced and improved even further after the 2nd wave as the sector imbibed new learnings to overcome challenges,” says Puri.
In a visible consolidation mode, the sector now has large players commanding a significant share in overall housing sales. Housing demand remains high as Indians continue to spend considerable time at home due to WFH and remote working. Also, the macro conditions support home purchases with the interest rates on home loans are at a decadal low (starting at 6.5%) and the overall employment scenario looks secure enough to support long-term financial decisions.
The positivity around physical indicators such as new launches and sales is reflected in the stock markets.
Outlook for 2022
The Indian residential real estate market seems to have embarked on a long-term upcycle, and 2022 is very likely to fare better than 2021. With COVID-19 now having become a more accepted part of life and Indians getting used to the new normal, businesses are looking to expand. Compared to 2021, the residential real estate market in 2022 will see lower volatility.