The overall residential demand would decline about 40% year-on-year in FY21, with the affordable segment being the worst hit due to the higher-than-anticipated slowdown caused by the Covid-19 pandemic, according to India Ratings and Research (Ind-Ra).
Buyers Market
As per estimates, there are over 6 lakh unsold flats in the key cities of Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Pune, and Kolkata, transforming the property market from sellers to a buyers' market. This inventory's piling up has led to price correction between 5 -10% in the key markets, and builders are offering promotional offers like free stamp duty, free GST, and free registration to attract the home buyers.
"Besides, price correction, we are offering free modular kitchen and gold coins to buyers. This is the best time to buy a house as the interest rates are all-time low," Anand Patil, promoter of Vaastu Realty in Navi Mumbai, told ABP News.
Low Interest Rates
The interest rates for housing loan has fallen a 15-year low to 6.75%, and with the falling property prices and interest rates, the salaried people paying hefty rents for houses are keen on investing in their own homes as the monthly rent, and the EMI of housing loans in many cases are almost the same.
"Home Loan at 6.75%! Covid has made our home the centre of life. Lower prices, lower stamp duty, low-interest rates could support home values going forward, like old times!" Uday Kotak, CEO Kotak Mahindra Bank said in a tweet last month.
Given that RBI, in its last monetary policy on Friday, decided to keep the rates unchanged, it is unlikely that the rates will fall further. With the revised growth forecast for the Indian economy, the interest rates will only harden.
Realtors welcomed the RBI's decision to keep policy rates unchanged and its projection of revival in economic growth, saying this will lead to a continuation of a low-interest rate regime on home loans and boost housing demand.
"Home loans will continue to remain at attractive rates, and this should augur well for home buying sentiment," Naredco President Niranjan Hiranandani said.
Government Subsidy
Once the dust raised by COVID-19 settles down and the under-development vaccine for the virus becomes available, it is expected that people would come forward to buy and invest in affordable housing units in significant numbers. The loans for affordable houses being entitled to credit-linked subsidy scheme with a Central subsidy of Rs2.67 lakh has made owing to a home of one's own an attractive proposition.
"We feel this is the best time for a home buyer to go ahead and avail a house of their dreams. Not only the interest rates are lower, but prices are also reasonable at this point of time. And clearly, the interest rate is a factor of liquidity and alternate avenues available for lending. So in this environment, banks have been a little conservative in lending, so interest rates came down. And as the economy improves and lending activity starts again, there can be an increase in interest rates. So to answer your question, I think this is the right time for customers to go ahead and buy," Sunil Samdani, chief financial officer, Bandhan Bank, told the ABP News.
Work From Home (WFH) Triggers Demand In Suburbs
COVID-19-triggered' work from home' (WFH) norm has increased residential demand in the suburbs in Bangaluru, Chennai, Hyderabad, Delhi NCR, and Pune, according to real estate platform NoBroker.com. People living in town side paying hefty rents near their offices are considering buying housing in the suburbs at the same EMI outgo. Potential homebuyers were earlier researching the best localities to buy a house near their workplace.
The platform's data shows how it has all changed since the pandemic's onset as the employees now prefer a more lavish ambiance for their house over proximity to their offices. Earlier, proximity to the workplace took the top spot among homebuyers' considerations.
Government Push
Giving a push to the real estate sector just before Diwali, Finance Minister Nirmala Sitharaman increased the fund allocation for the Prime Minister Awaas Yojana-Urban (PMAY-U). The amount was raised by as much as Rs 18,000 crore, which is over and above the Rs 8,000 crore earmarked in the budget for 2020-21.
According to the Minister, the higher allocation towards the PMAY-U scheme will help start construction work of 12 lakh houses and complete 18 lakh houses. Some state governments, including Maharashtra, have reduced the stamp duty and registration charges to boost housing sales, while other state governments are likely to follow suit.