Silver lining of 2020 for Indian real estate


Beyond the pessimism & optimism and, to some extent, more than expected recovery post the Covid-19 lockdown, the fact remains that 2020 has been by and large the most unforgettable year for the economy in general and the real estate market in particular. The old timers in the business even maintain that this has been even worse year than the global economic collapse after the Lehman crisis in 2008.

As everyone within the sector had resigned to the unforeseeable future in the first half of the year, the second half of 2020 had some silver lining for the business. The established players in the property market woke up to the reality that the demand, both inherent as well as pent up demand, is leading to the traction towards credible developers. Even the stock prices of most of the leading names that had nosedived to record low bounced back by the end of the year.  

Silver Lining of 2020

Better than expected recovery in second half of the year: The pent up demand in the lockdown made the fence sitting buyers realise that in times of uncertainty a house of one’s own could not only be an asset but could also act as a safety valve. And hence, it has been a better than expected recovery in the second half of the year.

Shift to digital platforms a smooth ride for both the builder and the home buyer: Digital platforms and tools like Augmented Reality and Virtual Tours were introduced into the Indian property market for almost a decade now. But the Covid-19 induced lockdown has changed the dynamics and complete reliance over the digital platforms was a discovery in a property market where physical site visit had been the norm.

REIT scaled up new heights; a few more in the pipeline: The success of REIT, one already on the bourses and the other over-subscribed during the peak of Coronavirus clearly shows the way forward and has been among the bright spots of the year 2020.

Realty stocks recovered from record dip and Realty Index bounced back by the end of the year: When the stock market tanked in the last week of March, 2020, Nifty Realty Index touched as low as 170.65 on March 24. Recovery since then has been more than expected with Index at 292.50 at the market closure of December 11.

Even with Work From Home being a reality, foreign funds bullish on the office space: Challenges for the office space has been way higher than any other segment of real estate the world over. However, the way foreign funds are bullish over the long term growth story of the office space has been beyond the analysts’ call.

Not-so-serious developers exiting the market & industry consolidation on the cards: With practically no new launches by the not-so-reputed developers and lot many JVs and JDs on the cards, 2020 has contributed significantly in the industry consolidation and exit of non-serious players.

Focus of the sector in its collective spirit shifted to delivery than new launches: New launches have been at a historic low in 2020 and the focus has shifted to the delivery since buyers prefer ready to move or near completion properties. It might be giving the impression of more unsold ready inventory in the market but bodes well for the sector weathering trust deficit.

Lower LTV borrowing and more down payment emerging as the mantra of safety: Not only non-serious developers have exited the market in 2020, even the non-serious buyers & speculators have also exited the market. There have been very few cases of investor activity of late and the serious buyers prefer to offer more down payment and lesser LTV (Loan to Value) borrowing.

Industry Speak

Deepak Goradia, Vice Chairman and Managing Director, Dosti Realty maintains that inspite of the lockdown having impacted economic activity, the real estate market has surged on better-than-expected earnings. While the sector experienced some initial glitches, government measures and sales incurred during the festive season have created a level-playing field for organised players to gain the most. The government’s efforts to boost affordable housing is also pushing the sector’s future growth wheel.

“The biggest learning this year has been that even the most adverse circumstances can yield a positive result if one perseveres, re-strategizes in time and makes optimum use of the resources at hand. While the first quarter of FY 2020-21 was a bit slow, Q2 and Q3 witnessed a significant upward surge in the demand for residential housing. Alongside, even the festive season of 2020 witnessed a strong bounce back in sales which has been instrumental in the sector’s revival. The subdued pace of construction activity due to labour availability issues is slowly being resolved; the government’s push by way of lower interest rates, reduced stamp duty, the extension of the PMAY scheme, etc are other factors that have been instrumental in drawing buyers towards home investment,” says Goradia.

Aditya Kushwaha, CEO & Director Axis Ecorp believes the real estate sector was already in bad shape before the Covid-19 pandemic; which has only added to the troubles of the distressed industry. April and May were probably the worst months when the chain of economy was broken. However, recently there has been a good spike in the recovery and demand for home loans has also gone up. With policy support from the Central Government, the real estate sector is displaying signs of growth, and sales numbers are increasing across cities. To boost housing demand, the Finance Minister had announced measures like an additional outlay of around INR 18,000 crore for PM Awas Yojana. This relief is expected to lift the demand, particularly in the affordable and mid housing segments.

“Due to the COVID-19 pandemic, the concept of a holiday home or a second home has gained widespread acceptance. With most of the corporate professionals working from home, geography is no longer a constraint. The need for a perfect balance between work and personal life has fuelled the concept of a weekend retreat in a holiday home. From the investment perspective, second homes in non-metro cities are a relatively safe investment option with higher capital appreciation compared to homes in metros, especially during COVID-19, when alternative options such as mutual funds, shares have seen diminishing returns,” says Kushwaha.

Hiral Sheth, HOD – Marketing, Sheth Creators agrees that while 2020 has been a bad year of sorts for people worldwide owing to the pandemic, the realty sector has emerged stronger. The segment has seen strong hand holding by the government which has helped it rise from the slowdown; it has been experiencing for a few years now and marches upwards with stronger growth in the years ahead. Additionally, the pandemic also turned people towards using more technology almost immediately like opting for virtual home tours, etc. thereby helping to ease of doing business.

“One of the biggest realisation of 2020 is that real estate as an asset class has stood strong during the time of crisis. And this has been well acknowledged by investors and home buyers alike. By staying at home, the new mantra of large spacious configuration homes in gated communities at prominent locations are in demand. This is because people want to have access to all the convenience in close vicinity. In fact, during the times of lockdown between March and May 2020, realty transactions continued to happen virtually, which is new for all,” points out Sheth.

From the home buyers’ standpoint, a record low rate of home loans, relaxation on Stamp Duty in a few states, better bargaining power with the builders, convenient & often customized payment plans and more ready to move options have been the silver lining of the 2020. In the final cost & benefit analysis, while COVID-19 had thrown some unprecedented challenges for both the real estate developers as well as the potential home buyers, the turnaround by the end of the year has been promising for the year ahead in 2021.

Ravi Sinha

@ravitrack2media

Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.

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