Publication: 99 Acres
June 3, 2021
The residential real estate market that suffered the most in the last one year is anticipated to recuperate in H2 2021. Though there will be many roadblocks in its recovery journey, the latent demand will have a significant bearing on the sector in the times ahead.
The COVID-19 pandemic severely disrupted the Indian real estate industry, with the housing sector being the worst impacted. According to an industry report, real estate prices in the top metro cities across the country dipped by 2-9 percent in the first quarter of 2021 due to the pandemic-induced lockdown. Furthermore, the housing sales decreased by 37 percent YoY, the worst by far in the last many years.
Residential real estate in 2021
While the year 2021 was welcomed with hope and chances of recovery, the second wave of the pandemic worsened the situation, and the sector came back to square one.
The spike in prices of essentials and raw materials like steel bars, cement, plastic, man-made polymers, and resins have put tremendous pressure on developers to increase the project rates. Furthermore, the supply shortage is making the situation all the more disastrous. Projects have been delayed and will continue to be postponed if the financial, raw material and workforce challenges persist. The daily wage workers were forced to return to their hometowns ever since the Coronavirus hit and left them jobless. Hence, the real estate market is struggling in the absence of skilled labour.
The road to revival for the housing real estate segment
Industry stalwarts anticipate that the market will experience a quick recovery once the second wave of the Coronavirus subsides. The growth trajectory will be similar to the one witnessed last year post the unlock 1.0. The journey will indeed be challenging, but sales are bound to happen.
Ever since the COVID-19 crisis hit, there has been a shift in the consumer psyche, and they are now inclined towards home purchasing. They think that real estate is ideal for personal investment amid the current unstable times and hence, are busy exploring different options in the market.
The Indian real estate market is also attracting attention from investors as they find an opportunity to invest in properties at relatively lower rates when compared to the pre-COVID times. Besides, the Reserve Bank of India (RBI) maintaining a steady stance on repo rates and reverse repo rates for the sixth consecutive time is also likely to have a positive bearing on the residential demand. Access to housing finances at affordable rates will push buyers one step closer to purchase their dream house. Also, the lenient home loan rules will too bolster the residential market in the Indian real estate sector.
The support from government initiatives
As per the IBEF report, the real estate sector in India is expected to contribute 13 percent to the country’s GDP by 2025 and hit the US$ 1 trillion mark by 2030. The study further states that the residential sector will grow significantly as the government is working to build 20 million affordable houses in urban areas by the end of 2022 under the Pradhan Mantri Awas Yojana (PMAY) scheme.
The Atma Nirbhar Bharat 3.0 policy announced in November 2020 offered income tax relief measures from November 12, 2020, to June 30, 2021, for both real estate developers and homebuyers for primary purchase/sale of residential properties of value (up to Rs.2 crore (US$ 271,450.60). This initiative, along with Make in India and Vocal for local campaigns, will boost the domestic supply and reduce the import dependency. Developers will prefer turning to local manufacturers to procure raw material. Collaboratively, all the Government policies will push the homebuying trend amongst people in H2 2021.