On the back of measured policies announced by the Central and state governments and the RBI coupled with the incentives offered by developers, the residential segment has been displaying green shoots of recovery as housing sales grew by 73% on a q-o-q basis across India’s best seven cities in Q42020, according to CBRE Realty Bytes.
As per the report, titled ‘Residential Real Estate in India – Challenges And Future-Proofing Strategies For Developers,’ the recovery continued in H1 2021, as sales recorded more than 75% development on a y-o-y basis. Pune led sales activity with an around 26% share, followed by Mumbai (19%). It was closely followed by Hyderabad and Delhi-NCR with 18% and 17% shares, respectively.
While the report captures the recovery of residential true estate, it also highlights the elements that led to the development of reasonably priced and mid-housing sales in India, more than the last decade.
Affordability at its highest in more than a decade
While home costs have grown at a CAGR of 1-6% across the higher-finish segment and about 2–7% across the mid-segment considering the fact that 2010, the per capita GDP grew at a CAGR of 4.% among 2010 and 2020.
Further, the development in GDP per capita for the best seven cities was above the national typical, with Bangalore reporting the highest CAGR (6.6%). Hence, the earnings development overtook the typical rise in the cost of properties, additional contributing to housing affordability.
Moreover, the RBI steadily brought down the repo price from 6.25% in February 2019 to 4.% in May 2020, which has led to interest prices on home loans come down to 6.7-6.9%.
Government’s initiatives to enhance reasonably priced housing
Affordable housing has regularly been on the Central government’s agenda ever considering the fact that the policy on ‘Housing for All by 2022’ was announced in 2014. The reduction in GST on beneath-building projects from 8% to 1% in 2019, coupled with several incentives announced in the Budget 2021-22, has helped reasonably priced housing grow to be the significant contributor to the sector’s development.
Commenting on the release of this report, Anshuman Magazine, Chairman, India & South-East Asia, Middle East & Africa, CBRE, stated, “The residential segment has played a major role in the real estate sector’s growth in India. The initiatives undertaken by the Central and state governments have been crucial and commendable for the revival in the residential segment. The past few Union Budgets were in themselves a testament to the government’s commitment to affordable housing. With incentives such as the all-time low-interest rates on home loans, extension of moratorium period on loans, coupled with reduction in either circle rate or stamp duty across a number of states, residential has not only shown recovery but has become a great addition to asset portfolios.”
Gaurav Kumar, Managing Director & Co-Head, Capital Markets, India, CBRE commented, “As work-from-home and e-schooling have become the new lifestyle, the need for owning a home has dawned upon homebuyers across the nation. This has induced a wave of change in the industry as developers got back to their drawing boards to design more accommodative homes to align with the demand. Further, the Government of India has been a major contributor to this rise in demand as it provided a clear fillip to the affordable and mid-segment housing demand.”
Although the residential sector is witnessing green shoots of recovery, developers are nonetheless navigating by means of concerns such as restricted availability of credit, tax and regulation complexities, building delays due to labor shortage brought on by reverse migration (although abated to a significant extent), larger input fees top to increasing building fees and very-leveraged balance sheets of quite a few developers have added a different layer of challenge for the sector.
Some of the essential elements that developers really should look at are preserving economic discipline, investing in technologies to expedite building timelines and move in line with the emerging trends in the RE segment, some of which are listed under:
Future trends shaping the residential segment:
# Demand for larger residences on the rise: To accommodate the trends of WFH and e-schooling, homebuyers could opt for bigger residences.
# Developers moving towards versatile residences: To preserve up with the residences that can accommodate home offices and classrooms, developers may possibly have to come up with versatile home styles.
# Housing demand moving towards peripheral places: As the commute time is anticipated to lessen owing to hybrid and satellite offices setups, cities’ peripheral places are anticipated to witness a larger demand as they present more accommodative residences at fairly reduced costs.
# Green and clever residences: Demand for sustainable and clever home styles could improve as customers grow to be more conscious of power fees.
# Re-assessment of labor practices: With well being and security of the labor force gaining more focus, developers are probably to safeguard the well-being of their labor pool by making sure sanitization and social distancing at building internet sites.
Way Forward for residential RE
Going forward, developers would have to foresee and strategy for any future disruption to the workforce and project delivery.
According to CBRE, under are some practices that could help developers to emerge stronger and resilient post the pandemic:
# Timely delivery to make brand loyalty and add-on services to develop trust with prospects.
# Accelerate adoption of modern day technologies and building tactics.
# Embrace powerful corporate governance and inculcate the ESG model.
# Maintain economic discipline.
# Diversify development portfolio re-align portfolio with marketplace dynamics and marketplace cycles.
# Invest in upgrading labor force skillset.