End users driving demand for homes

In the absence of a major fiscal stimulus from the government, it seems consumer demand is coming to the rescue of the economy, and residential real estate has been among the key sectors to witness a return of interest among home buyers after the lifting of the lockdown, with sales number increasing significantly.

Housing sales across the seven top realty markets doubled during the July-September quarter.

Data by PropEquity showed that sales or absorption of housing units increased by 104 per cent across the cities in the third quarter of 2020 to 50,983 units versus 24,936 units in the previous quarter.

Niranjan Hiranandani, the President of National Real Estate Development Council (Naredco) said that there is "definitely a revival". "Property registration data for the month of September says it all. Recovering from the effects of the pandemic-induced lockdowns, buyer sentiment is on the uptick," Hiranandani said.

He cited low interest rates and offers given by developers as reasons for the return of demand.

"The other side is, owning a house turning into a 'prime need' in the aftermath of the pandemic. Demand for spacious homes with additional flexi space has registered a surge, especially in the 'ready to move in' category. The incentives by the Government of India for first time home buyers have had a positive effect," said Hiranandani.

Not just sales, supplies also increased during the July-September quarter. The new supply or launches of housing units also increased by 126 per cent during the same period to 38,131 units from 16,808 units in Q2 2020 as developers launched several projects post the lockdown, as per PropEquity.

As a result of the rise in sales, the inventory declined to 2 per cent to 7.96 lakhs. Delhi NCR witnessed 295 per cent home sales growth in Q32020 versus Q2 2020 while other cities including Bengaluru, Chennai, Hyderabad, Kolkata, MMR and Pune clocked 86 per cent, 131 per cent, 159 per cent, 89 per cent, 70 per cent and 72 per cent growth respectively. Anuj Puri, Chairman, Anarock Property Consultants said that the revival in the housing segment is being driven primarily by end-users.

"There are several reasons - property rates have remained stagnant for almost seven years now and if we take into account the inflation rate, the prices have corrected significantly across all the micro markets. Home loan interest rates are at a 15-year low," he said. Arvind Nandan, Managing Director for Research & Consulting at Savills India, however, is of the view that it would be too early to draw a conclusion on the revival of the market at this point.

He noted that while potential homebuyers can be seen gradually coming back to the market since the unlock, "it would be premature to conclude as demand revival".

Nandan said that the real estate market's recovery could take time till mid-2021. He also said that demand is likely to be focused on suburban and extended suburban projects.

The increase in demand is not just evident in the residential segment as the commercial space too has witnessed an uptick. India's office market witnessed a net absorption of 5.4 million square feet in quarter ending September 2020 (Q3), an increase of 64 per cent versus quarter ending June 2020 (Q2),as per data from JLL Research.

The third quarter office rebound growth was led by Bengaluru and Hyderabad, which together accounted for nearly 80 per cent of the net absorption in Q3 2020. The heightened activity in Bengaluru indicates a gradual resurgence in take up of spaces coupled with the translation of pent up demand from Q2 this year.

"While we continue to see the impact of the pandemic on various businesses, there is a significant surge in activity across most office markets under consideration. This is seen in gross leasing which more than doubled from the previous quarter at 13.8 million sq ft," Ramesh Nair, CEO and Country Head, India, JLL.

At the same time, it is important to note that large and mid-sized occupiers across major markets continue to review their real estate portfolios in a bid to optimise cost, higher emphasis is being given on sustainability and employee well-being as well as adoption of flexible working practices, he said.