Measures taken by the government and central bank have helped in ushering a recovery in property
The kind of damage the virus spread has inflicted on the economy in general and real estate in particular, it may take a while before the sector can regain normalcy. Reaching the level that existed before 2014, the year when a general slowdown gripped the sector and continued to do so before the pandemic made things much worse, is going to be even more difficult. However, a phenomenal change has taken place because of the biggest health emergency of the modern world.
Since safety and security have become the single biggest concern for all of us in the backdrop of the pandemic, homeownership has gained more prominence in the minds of people than ever. Despite the financial challenges imposed by the lockdown, those who have the wherewithal, have quickly invested in properties to have a home that would provide them the desired security that could only be expected from your own home. This trend is reflected in the sales numbers during the July-September period, the quarter which saw the government starting the phased unlocking of the economy after an over three-month lockdown to contain the spread of the virus.
Trends spark hope
Data available with PropTiger.com show home sales numbers in India’s eight prime residential markets spiked 85 per cent in the September quarter over the previous quarter, with the sub-Rs 45 lakh price segment contributing 45 per cent to the total numbers. Overall, developers sold 35,132 units during this period. Primarily because of dismal supply, housing inventory has also declined 12 per cent year-on-year. The unsold stock of the eight residential markets stood at 723,060 units as of September 30, 2020, as against 823,773 units during the same period in 2019.
While their figures may not seem quite impressive when looked at in isolation, they do indicate an early recovery for the residential segment, considering the prevailing economic conditions, when GDP growth has contracted to record low levels and uncertainties loom over job security. That a more stable future awaits the residential segment is also ensured through a variety of measures launched by the government and the central bank to usher in recovery for a sector that is not only the second biggest employer in the country but also a source of income for a large section of India’s unskilled workforce.
Aside from lowering benchmark lending rates to a record low of 4 per cent, the RBI has also issued directives that would ensure higher availability of funds for the sector--- it recently directed HFCs to lend at least 60 per cent of their loans to the sector, 50 per cent of which should be disbursed towards individual home loans. The six-month moratorium on home loans and the SC move to waive the interest on interest also some measures that would support the existing buyers in a very challenging time.
Real estate developers have also risen to the occasion and have ensured smooth transactions for buyers during the pandemic period by quickly switching to virtual mediums to facilitate the process. The majority of sales during the September quarter, in fact, were carried out using online platforms.
Going forward, the developer community will have to ensure higher stands of project delivery compliance despite the labor shortage and supply concerns. While planning new supply they should also be mindful of a new trend. As the sector gears up to regain some of its past glory, Tier-II and Tier-III cities are likely to play a more crucial role as indicated by Housing.com’s Virtual Residential Demand Index. These cities have seen higher demand post the lockdown period as more and more people move to their native places and plan to invest in properties there.
The author is the Group COO of Housing.com, Makaan.com, and PropTiger.com