Year Ender 2021: How The Real Estate Sector Embraced New Normal After Covid Slump

The Indian real estate market, which came to a standstill in 2020 because of the first wave of the pandemic and lockdowns, has shown indomitable resilience and crafted its way forward in 2021

The realty sector has made a strong rebound and housing sales have jumped over twofold during the July-September 2021 period at 62,800 units across seven major cities, according to reports. Image: Getty

New Delhi: Indian real estate sector is out of the woods.

The realty market, which came to a standstill in 2020 because of the first wave of the coronavirus pandemic and lockdowns, has shown indomitable resilience and crafted its way forward in 2021, with the government pitching to support the developers and introducing various schemes and relaxations.              

The market entered 2021 with caution and anxiety as the pandemic was still raging across the world. Situation in India was no different. The real estate sector emerged from the nationwide lockdowns with a valuable sense of resilience, damage-limiting skills, and a new way of envisioning the business environment.

One important point of 2021 for the Indian residential real estate sector was that the business did not come to a standstill despite the second wave of the pandemic. This indicates that the steep learning curve induced over the pandemic years has led to superior business practices and an overall stronger housing market.

The reports showed the realty sector has made a strong rebound and housing sales have jumped over twofold during the July-September 2021 period at 62,800 units across seven major cities.

Some market analysts have pointed out that the Indian residential real estate sector’s comeback after the second wave in Q2 2021 was phenomenal and V-shaped one.

Between January 2021 and September 2021, 1.63 lakh units of new residential supply were added across the top seven Indian cities, 27 per cent higher than 2020 full year supply, and 1.45 lakh units were sold, which is 5 per cent higher than in the whole of 2020.

According to a report by Anarock, in 2020, 1.28 lakh units of new residential supply were added across the top seven India cities, while sales were clocked at 1.38 lakh units. From the previous peak of 2014, supply was down by 77 per cent and sales were down by 60 per cent. This large-scale decline indicated that the residential market had bottomed out in 2020 and was likely to enter a long-term upcycle from 2021 onwards. 

The Indian real estate sector has also seen some significant changes. The sector has been under transformation for the past few years. However, the pandemic has accelerated its move. 

Recently, Deloitte Touche Tohmatsu India LLP (Deloitte India) released a report, titled ‘Reality of realty in a post-COVID-19’, which captures the trends that will pave the way for the recovery of the sector. The report said the pandemic has triggered a change in consumer behaviour and that is one of the factors enabling this sector to bounce back.

About 74 per cent of respondents expect that there will be an increase in demand for the residential sub-sector, of which, 86 per cent indicated a 10-20 per cent increase.

With WFH and online schooling became the new normal, there was a high demand for larger houses and as a result, mid-segment (units priced at Rs 40 lakh – Rs 80 lakh) and high-end (units priced between Rs 80 lakh and Rs 1.5 crore) did well, showed a report by Anarock.

The need for possessing a home, low home loan costs, and different payment plans from developers helped property purchases during July-October period recording the highest sales.

Key Highlights Of 2021

Adoption of technology: Real estate sector has now become a digital-first sector.

Rational rate hikes: Unlike before, developers now hike prices in a disciplined manner, primarily to compensate for increasing input costs. They are aware of the fact that any unwarranted price hike will deter the demand cycle. Between Q3 2021 and Q3 2020, prices appreciated by around 3 per cent.

End-user-driven market: Around 85 per cent of homebuyers are now end-users, and investors have more reasonable return on investment (ROI) expectations.

Demands for larger houses: In the past two years, demand has skewed towards homes large enough to accommodate the work from home (WFH) and e-schooling realities, and the average sizes of new unit launches have risen by 26 per cent.

Non-apartment segment: Along with apartments, a huge demand for plotted developments and villas led many developers to increase their focus on the non-apartment segment.

Luxury and ultra-luxury segment: As the net worth of the target group for luxury offerings was not severely impacted by the pandemic, the buyers proactively closed deals to take advantage of the market conditions (subdued demand, stamp duty reduction, developer discounts).

More launches in suburbs: Peripheries witnessed increased traction with more than 60 per cent launches in 2021 were in the suburbs.

Rally of realty stocks: The year 2021 saw a bull run not only in real estate stocks but also in the broader market. Ample liquidity targeted the stock markets on the back of satisfactory ROI expectations. The arrival of the Omicron strain towards the end of 2021 has slowed this movement to some extent, but mid-to-long term prospects remain highly positive to a large extent in India, and most businesses are back on track.

Top listed developers clocked record sales: The top listed and non-listed developers with good corporate governance practices, financial accountability, trust, and brand witnessed very good sales. There is a clear trend emerging wherein homebuyers are willing to pay a reasonable premium for the products being offered by the reputed players.

‘Realty’ Check Of Big Developers

Brigade Enterprise’s sales bookings grew by 59 per cent to Rs 1,310 crore in April-September period

Godrej Properties’ sales bookings jumped 18 per cent to Rs 3,072 crore in Apr-Sep 2021

Prestige Group’s Q2 FY22 sales bookings were up 88 per cent YoY to Rs 2,112 crore

Macrotech Developers sold properties worth Rs 3,000 crore in April-September; on track to reach the Rs 9,000-crore target for FY22.

Sobha got the best sales value of Rs 1,700 crore during the April-September period.

(Source: Anarock)