India’s residential property market is providing signs of recovery among the low purchasing costs, lowered duties, and attractive offers from developers, but the sector needs more government support to conquer the impact of the Covid-19 pandemic.
“Government support in terms of reduction of stamp duty and historic low-interest rates have set the sales momentum with end-users making the most of this opportunity,” says Manju Yagnik, vice-chairperson at Nahar Group, a Mumbai-based developer.
“We expect a good 2021 in terms of new project launches, sales … [more people] becoming homeowners for the first time, and the industry achieving some sort of stability.”
India’s real estate sector, being the second-biggest employer after the agriculture sector, will represent around 13% of the nation’s GDP by 2025, as indicated by information from India Brand Equity Foundation.
The industry, which was fighting even before the pandemic due to the fluidity problems and weak sales in between a slowing economy, was hit hard as construction came to a granulating end for a while at the peak of India’s severe Covid-19 lockdown a year ago. Joblessness in Asia’s third-biggest economy climbed and GDP plunged, evaporating the pipeline of expected clients.
However, as India’s economy regains its strength, property demand is rising. The revival is being led by the country’s financial capital, Mumbai, which has witnessed a rush in home deals this year.
The previous month, properties costing more than 117 billion rupees ($1.59bn) were dealt in Mumbai, up 34 percent from the previous year and 15 percent higher in comparison to January, as per the data from Indian analytics and research platform Propsstack.
“We posted a 45 percent growth in terms of the value of transactions till January 2021 [from the start of the financial year in April 2020] as against the same period last year,” says Percy S. Chowdhry, Director, Rustomjee Group.
Mr. Chowdhry, whose firm has a portfolio of 16.6 million square feet of finished projects in Mumbai, predicts the value of deals to increase about 60 percent by the end of the current financial year.
“The record number of property registrations [in Mumbai] for the month of February 2021 is a cumulative outcome of government fiscal stimulus, resumption of sectoral output, rise in investment to boost infrastructure, pent up demand, and festive season consumption tailwinds,” says Niranjan Hiranandani, the national president of the industry group National Real Estate Development Council, or Naredco as it is known.
Maharashtra, where Mumbai is situated, is in the states that lowered the stamp duty on properties, decreasing it to 2 percent from 5 percent in between October and December and ti 3 percent from January by the end of this month.
“The booster dose by the government and regulatory bodies in form of reduced stamp duty, low-interest rates, deal sweeteners by the developers, and [a huge] choice of apartments available [to customers] has induced fence-sitters to convert into homebuyers across markets,” says Mr. Hiranandani, who is also managing director of Hiranandani Group.
The checked improvement in economic activity has supported financial backer certainty, he says.
The newest official GDP numbers for the quarter to December showed a return to rising, with the economy enlarging by 0.4 percent on the year. This came after India stepped into a recession in the previous year. Moody’s Investors Sevice now predicted India’s economy to increase by 13.7 percent in the financial year starting in April.
Lower purchasing costs are also stimulating the market. In its pandemic policy response, the Reserve Bank of India applied two emergy interest rate cuts that have made mortgages in the country more affordable for buyers.
“Interest rates are [at] the lowest and developers have been sensible about the pricing,” according to Renu Sud Karnad, managing director of HDFC, one of India’s biggest private banks. “People are venturing out and buying homes,” she added, speaking at a virtual event on the property market this month.
Government initiatives to cushion the effect of the pandemic are “not going to be there forever”, she cautions.
By and by, engineers stay playful about the area’s standpoint. The Covid-19 emergency, they say, has prodded new interest in house purchasing.
“There’s the demand coming in from first-time homeowners,” Aditya Kushwaha, chief executive at Axis Ecorp, a developer in the coastal state of Goa, says. “Due to the pandemic and the uncertainty that followed, many people living in rental homes are now striving to get a home of their own.”
Being a Goa developer, business for Axis has resonated as “the work from anywhere lifestyle has encouraged many to look for a second home that is away from the hustle and bustle of city life”.
“The positive sentiment has returned … and the trend is expected to continue in the future,” says Mr. Kushwaha. “Buoyed by the demand that we have been getting, we [have] launched a project in the premium smart villa space”, and the firm is also working on plans for new projects in Mumbai and the north Indian hill station Shimla, he adds.
Dhiraj Jain, the director at Mahagun India, a real estate developer in the Delhi National Capital Region, says one of the consequences of the pandemic is that buyers are looking for larger homes to live “king-size lives with enough room”.
“One of the best indicators of growth is new launches in the market, which [indicates] that there is a demand for property,” explains Mr. Jain.
For the last few months, developers have been “gearing up” for more launches in 2021, which is a good sign for the market, he adds.
Another pattern that is helping the area is a rise in demand for homes from non-occupant Indians or NRIs.
“The Covid-19 pandemic has increased NRIs’ emotional association of long-term security with physical assets,” says Prashant Thakur, director and head of research at Anarock Property Consultants
Around 63% of NRIs referred to Covid-19 as the great explanation behind purchasing homes in India, as indicated by a review by Anarock.
“They are also driven by uncertainties posed by Covid-19,” adds Mr. Thakur. “Luxury properties … [are] hot-favorite with NRIs because of the depreciating rupee value translating into greater buying power, coupled with ongoing developer discounts and offers.”
The IT hubs of Bangalore and Pune have witnessed the highest NRI demand, Anarock’s research shows.
Almost 68% of NRIs believed the land to be the best resource class in India, as indicated by the overview.
Mortgages in the second half of 2020 stayed largely static across seven major cities in India in comparison to the last year, as per the Anarock data.
“We expect that the prices will go up soon as the cost of raw material has gone up substantially,” says Ashok Gupta, the managing director of Ajnara India.
In spite of the fact that restoration in deals looks good for the market, engineers say there are a few factors that are easing back the area’s recuperation.
“There is strong demand in the market but there are certain challenges that are throttling the growth” including the goods and services tax (GST) rate in India, says Mr Kushwaha.
“NRIs investing in Indian real estate have to pay GST even if the property that they purchase is still under construction. Offering incentives and relaxation on tax to this segment will encourage better investments in the sector,” he adds.
Developers debated that more help from the government and the central bank can increase the revival of the sector.
“We want the government to continue the benefits [for the sector] be it stamp duty reductions, lower interest rates bank loans, [or] income tax relief, to attract more buyers to invest in real estate,” says Ms. Yagnik.
