Indian Residential Real Estate Major Highlights of 2021 | NAREDCO India | ANAROCK | SURFACES REPORTER Real Estate Update

As we are inching towards the new dawn of 2022 amid the threat of another wave of an ongoing pandemic, the real estate sentiments are high due to the recovery it has seen in the last few months. SURFACES REPORTER picks up some of the major Real Estate highlights of 2021 from the ANAROCK report and also talks about the future as told by NAREDCO

According to ANAROCK real estate consultancy, the Indian real estate sector has transformed significantly during the past few years and the pandemic has accelerated the transformation. During the third quarter of 2021, the supply has risen to 64,500 units which is 1.8 times of second quarter of 2021. Similarly, the sales were up with 62,800 units in the third quarter which was 2.6 times higher than the previous quarter.

There are several key points that has happened during 2021

  • Digitization: Real Estate, which was earlier one of the least digitized sector has emerged as one of the key buyer of the industry during the pandemic. According to Anuj Puri, Chairman, ANAROCK Group, “In a mere 90 days, we have vaulted forward 10 years in consumer and business digital adoption. Real estate has become a digital-first sector.”
  • Reasonable hikes: One of the major changes that the realty sector witnessed was price hike in a disciplined manner. Unlike the earlier times, developers are now raising the prices in a controlled manner and that too only to compensate for the rising input costs. They are well aware that a higher rise in prices may deter the customers from buying, thus putting an end to the revolving demand cycle. In fact, between Q3 2021 and Q3 2020, prices appreciated by a mere 3%.
  • Majorly end-user-driven market: 80 - 85% of homebuyers are now end-users, and investors have more reasonable ROI expectations.
  • Demand for Larger Homes: Due to the pandemic, the focus of residential realty has tilted towards larger units owning to requirements like WFH and e- schooling, and the average sizes of new unit launches have risen by 26%.
  • Broad-based requirements: Along with apartments, a huge demand for plotted developments and villas led many developers to increase their focus on the non-apartment segment.

Anuj Puri, Chairman, ANAROCK says, “Luxury and ultra-luxury segment fared well as the net worth of the target group for luxury offerings was not severely impacted by the pandemic. These buyers proactively closed deals to take advantage of the market conditions (subdued demand, stamp duty reduction, developer discounts). Villas, farmhouses and second homes were in demand as buyers looked to purchase properties that offered superior social distancing and lower infection risk in less populated, greener environs. Also, with WFH being the new normal, people could work from anywhere. Peripheries witnessed increased traction with more than 60% launches in the further suburbs.”

Structural Reforms led to a holistic and true development

Structural reforms and policy changes have been ingrained into the Indian real estate sector. Nearly 1/3rd of the overall residential area today is sold by large listed and unlisted players. Only developers with adequate financial muscle, brand name, execution track record, and corporate governance will witness growth and success in the future. There is an increased FDI in the real estate sector as well. For instance, Goldman Sachs’ plan to return to Indian real estate with USD 2 – 3 Bn investment.

“Perhaps the most important high point of 2021 for the Indian residential real estate market was that the business did not come to a standstill despite the 2nd wave of the pandemic. This indicates that the steep learning curve induced over the last two pandemic years has led to superior business practices - and an overall stronger housing market,” says Anuj Puri.

Overall, real estate stocks boomed in 2021 as developers garnered good sales and were actively launching new projects. After the 1st wave, the real estate sector’s recovery was pronounced and improved even further after the 2nd wave as the sector imbibed new learning to overcome challenges.

In a visible consolidation mode, the sector now has large players commanding a significant share in overall housing sales. Housing demand remains high as Indians continue to spend considerable time at home due to WFH and remote working. Also, the macro conditions support home purchases with the interest rates on home loans are at a decadal low (starting at 6.5%) and the overall employment scenario looks secure enough to support long-term financial decisions.

According to the report by ANAROCK, key players of the realty segment enjoyed the trust of the customers and recorded major jump in the bookings. For instance, Brigade Enterprise Ltd.’s sales bookings grew by 59% to INR 1310 Cr in Apr-Sep 2021 while Godrej Properties' sales bookings jumped 18% to INR 3,072 Cr in the same quarter. Prestige Group’s Q2 FY22 sales bookings were up 88% Y-o-Y to INR 2,112 Crore while Lodha sold properties worth INR 3,000 Cr in Apr-Sep 2021; on track to reach the INR 9,000 Cr target for FY22. Sobha achieved the best sales value of INR 1,700 Cr+ in Apr-Sep 2021.

As per ANAROCK’s latest consumer sentiment survey, there was a clear rise in the preference for properties priced over INR 90 Lakh. During the 1st wave, 27% of the respondents preferred properties priced over INR 90 Lakh, which increased to 38% during the 2nd wave. The luxury segment, which is a value-driven and not a volume game, also did well this year as the homebuyers of this segment looked to close deals at lucrative valuations.

The affordable housing segment, on the other hand, slowed down in 2021 because; Significant supply addition (~ 1.7 lakh units) from 2019 till Q3 2021 (1/3rd of overall new launches). As a result, developers throttled back affordable housing supply to take stock of the situation and focus on execution rather than adding new projects. COVID-19 impacted the livelihoods of affordable segment homebuyers, causing demand to reduce. However, with the Omicron variant of COVID-19 not impacting India severely as the Delta strain and market conditions improving, the affordable housing segment will pick up again in the next few quarters. The Government continues to remain focused on the affordable housing segment and is doing its best to spur demand through tax incentives to developers as well as buyers.

"What further proved to be a respite for the sector was, an all-time low interest rates and stamp duty reduced significantly by the Maharashtra Govt and followed by many other states. It helped boost the housing demand. Moreover, the pandemic also triggered a change in consumer behaviour and that is one of the key factors enabling this sector to bounce back. The homebuyers are looking out for projects that are spacious, deploy sustainable materials and are giving preference to self-sustaining societies. They are expecting a better experience and long-term connection with their house."- Rajan Bandelkar, President, NAREDCO

Outlook for 2022

The report portrays a very optimistic outlook for 2022. The Indian residential real estate market seems to have embarked on a long-term upcycle, and 2022 is very likely to fare better than 2021. With COVID-19 now having become a more accepted part of life and Indians getting used to the new normal, businesses are looking to expand. Compared to 2021, the residential real estate market in 2022 will see lower volatility.

Echoing the similar sentiment, Rajan Bandelkar, President, NAREDCO India says, “From halted construction activities, mass migration of migrant workers, rise in cement, steel and other building material prices to negligible homebuyer, the impact of coronavirus on the Indian Real Estate was stifling.  With the gradual opening up of the economy, across construction sites, safety precautions were taken, and protocols were followed compulsorily. The opening up of vaccination for 18-year-olds and above has impacted the construction site workers in a positive way. The vaccination process boosted the confidence of the entire sector. Also, it helped increase the safety level at construction sites.

Also, as people are returning to offices and organisations adapting to hybrid working models, the commercial real-estate sub-sector is too poised for growth. Furthermore, approvals, and the completion timeline extensions provided by State RERA authorities also provided additional time for project completion to the real estate developers. The fact is that Indian real estate has never been new to challenges and like previous times, it has once again emerged stronger and showing signs of steady recovery.”

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