The arrival of 2021 will not shake off all the challenges of a pandemic-riddled economy but the groundwork for a sector-wide recovery has been laid.
While there is still a long way to go, the worst is behind for the residential sector, reveals a JLL report. It says the challenges faced by residential real estate in 2020 have, in fact, become the catalyst in providing stimuli to the industry for sustained growth. With people spending an inordinate amount of time at home, the lockdown re-established the importance of owning a house. At the same time, the Central Bank is leading the way to recovery by holding policy rates at historically low levels to initiate a cycle of consumption-led growth.
This has resulted in extremely low mortgage rates. And, prices have also been stagnant for the past few years. This affordable synergy makes it a great time to purchase a home. Furthermore, the market is also witnessing renewed interest from Non-Resident Indians (NRIs).
“The significance of owning a home to avoid the uncertainties of living in a rented accommodation was reinforced during the pandemic. The desire to own a home is perhaps now stronger than ever. Moreover, while end users continue to drive demand, there is renewed interest from investors and from Non-Resident Indians (NRIs) impacted by economic uncertainties in Europe and the Middle East,” the report states.
Changing homebuyer preferences and product metrics
A healthy lifestyle will be a key criterion for homebuyers in the post-COVID era. Resultantly, preferences will tilt towards larger homes in self-contained complexes with facilities like gym, green open spaces and access to daily necessities. Moreover, with work from home becoming a reality, product metrics are likely to change.
Also, remote working practices will increase the attractiveness of suburban markets. Suburban markets offer lower density environments and more spacious apartments at affordable rates. Since, travel to office may no longer be an everyday activity, the importance of connectivity to office hubs will no longer dictate home purchases.
It is also pertinent to note that project delays, especially in the NCR market, could be cited as one of the biggest reasons behind a demand slowdown that has gripped India’s residential market in the last few years. As delivery timelines remain a key concern even now, demand for ready-to move-in homes is likely to be remain strong. However, the effective and uniform implementation of RERA across all states/UTs in India is expected to improve the confidence of homebuyers and ultimately, lead to greater sales traction in under-construction residential projects.
Focus on affordable and mid-segments to continue
In 2021, a further improvement in sales across all housing segments is expected. However, development focus on mid and affordable segments is expected to continue. In 2020, more than 80% of the new launches were in the sub Rs 10 million category. Moving ahead, new launches will remain concentrated in these price segments with developers trying to reap the benefits of strong pent up demand in these segments. The government is also committed towards boosting affordable housing. The recent Union Budget has extended the benefit of additional interest deduction on home loans for first time home buyers in the affordable segment. Further, there is a time extension to claim the tax holiday on profits from affordable housing projects until March 2022.
Recovery in alternative residential asset classes
The organised shared housing market in India has seen the influx of several organised players in a bid to tap the opportunities arising out of the strong demand from a growing millennial workforce and student population. While the market took rapid strides in the past few years, 2020 brought the co-living and student housing sectors to a grinding halt. As migrant millennial workers move back to the major cities and higher education institutes resume physical classes, occupancy levels in organised setups is expected to go up and gradually return to 2019 levels by the end of 2021. There will be an increased focus on health and wellness aspects in the post-COVD era, which is expected to drive demand for organised co-living and student housing setups.
Increase in activity as sentiments improve
Moreover, senior citizens living alone were the most impacted during the pandemic. The role of organised senior living facilities, which are designed with senior friendly amenities such as medical support on call, services for food, housekeeping and assistance around the clockbecame more prominent during these trying times. This has increased the attractiveness of such facilities and demand for organised senior housing setups is expected to pick up in the near future.
“If 2020 was the year that changed everything, 2021 may be the year where change becomes the ‘new normal’ and adapting to this ‘new normal’ will require imagination, innovation and digital transformation. The arrival of 2021 will not shake off all the challenges of a pandemic-riddled economy but the groundwork for a sector-wide recovery has been laid. The year is poised to establish itself as the year where India enters a new phase of real estate growth, innovation and investment,” says Dr. Samantak Das, Chief Economist and Head – Research, JLL India & Sri Lanka.