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Green Shoots On Horizon?
The New Year may just bring in the much needed recovery for housing and commercial segments, as buyer interest is on the rise due to an all-time low interest rate and other factors
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Overall, it was a tough year for real estate in India, as was the case with most other industries. With the Covid-19 pandemic induced lockdown in March, the sector went from bad to worse. The migration of labourers and disruption in supply of raw materials saw a stoppage in construction activities. Rent negotiations by retailers amidst no or low footfall in malls and work from home (WFH) adversely affected the retail and office segments.
However, there were some upsides as well. Technology integration via virtual home tours, video conferencing with prospective clients, targeted digital campaigns, and webinars have become a regular practice now. There has been a significant rise in digital launches, virtual property events, online listing and viewing, data analytics, cloud-based services, and much more. The traditional O2O (online to offline) model is now recalibrating with the digital medium now playing a much bigger role.
On the back of government stimulus and RBI's liquidity measures, there was some uptick in demand following the partial opening of the economy. Nevertheless, the positives that have emerged from the Covid-19 crisis will form the cornerstone for the coming decades of growth in the real estate sector and Indian economy as a whole, say sector experts.
Return of Demand
Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE says, "Green shoots of recovery have now been witnessed as housing sales in Q3 2020 increased by a strong 86 per cent on a quarterly basis. The apartment units covered in top 7 cities was 12,000 units in Q2 2020, however it grew to 22,000 units in Q3 2020. This was largely due to strong policy support, low mortgage rates, reduction in stamp duty and property registration fee (in a few states) along with incentives and attractive payment schemes offered by the developer community," he explains.
The reverse migration led to the emergence of heightened demand for homes in Tier-2 and Tier-3 cities as well as rentals. Demand for bigger homes inside an open, hygienic and green complex with facilities like healthcare, daily necessities and everyday rejuvenation within walking distance formed the crux of increased demand for branded and reputed developers who would not just provide value for money products and services but also had the ability to deliver those projects.
As far as the office segment is concerned, it will remain affected as rationalisation of workspace by the corporate sector has led to a pile up of inventory that is expected to take 2-3 years to clear. Additional supply that is being created despite subdued demand will aggravate the situation further. As far as the retail segment is concerned, those with 2-3 years' delivery timeline will continue to be highly sought-after but, more importantly, the trend of developing more organised retail space, mainly commercial redevelopment projects in metros, will become more prevalent in the times to come.
Tier-2 and Tier-3 cities as compared to metros have seen robust demand in residential segment due to reduced home loan rates and buyers' inclination towards integrated living.
A host of factors turned out to be favourable for the affordable housing segment, beginning with Rs 3.74-lakh crore liquidity infusion announced in March, the CLSS extension, relief under EPF and the slashed repo rates leading to lowest home loan interest rates in past 15 years.
Demand for integrated townships is on the rise due to the amenities provided within the premises and controlled living conditions. The upcoming year will witness development of more integrated township projects in this particular market with expansive green cover and close attention to hygiene and cleanliness.
"2021 looks great for the commercial real estate as a good number of NRIs are willing to invest in India. Ease in FDI norms, transparency of RERA, techdriven tools for real estate have made the process more welcoming," says Ashish Bhutani, MD, Bhutani Infra.
The demand for commercial among youngsters has picked up pace in the wake of Covid-19. Developers say younger age-groups are looking for a source of extra income and rental income from the commercial is a smart way to get it.
Areas to Watch Out for in 2021
Ramesh Nair, CEO & Country Head, JLL India tells BW Businessworld that the office space investment appetite remained intact during the pandemic and it was the first segment to bounce back during the partial relaxation of lockdown.
"REITs helped de-risk investments with greater transparency, governance, and provided investors opportunities to arbitrage between public and private markets. Investment volumes in 2021 are expected to be driven by REITs, with 2-3 new REITs in the pipeline for next year," says Nair.
The logistics segment, says Nair, is likely to see a few platform deals materialise in the first half of 2021. "It has remained attractive for investors on the back of a growing demand from e-commerce and pandemic-induced demand for cold storage facilities from pharma companies," adds Nair.