2021 can be best summarized as eventful, particularly for the real estate segment. The initial half of the year, till around April-May, the sector witnessed steep growth and there was a small blip in those two months owing to lockdowns, as an aftermath of the second wave of COVID-19 pandemic; but from June onwards, real estate industry has been on an upswing. In the July to September quarter, both residential and commercial real estate segments witnessed stability. In fact, 2022 looks very optimistic as the segment is on the path to not just regain the pre-pandemic momentum but surpass it. The low interest rates and ease of liquidity will bolster the entire sector, especially in light of the Housing For All initiative. The further rationalisation of GST for under-construction projects coupled with tax benefits will be a welcome stimulus.
Looking back at 2021…
While the impact of the pandemic continued in 2021, businesses were more prepared and agile to adapt to the changes and recover faster. Real estate, which was one of the worst hit industries in 2020, held a steady ground in 2021. Players in the segment were able to get back on track sooner and even launch new projects amidst the pandemic. Incidentally South was stronger than the rest of the country, when it came to revival and growth. The sales figures across South India, for the first three quarters of 2021, indicated a positive turnaround compared to the same time period in the previous year. This trend was driven by revival in the consumption, new project launches and timely policy reforms. Advantageous foreign exchange conversion rates also enabled the NRI population to purchase real estate in Telangana, Karnataka, Tamil Nadu, and Kerala, which contributed to faster recovery of the real estate market in the South.
In terms of the city-wise outlook, Hyderabad led the recovery this year, with affordable living and excellent infrastructure being the two driving factors for continued real estate investment in the city. It has been a largely positive year for the city, which leads in new project launches amongst Indian cities, with an increase of 19% in 2021 compared to the previous year. In terms of new launches, a growth of 189% year-on-year was recorded in Q3, a 40% increase compared to Q2. Localities like Gachibowli, Tellapur, Dundigal, Nallagandla, Medchal and Kompally saw the most project launches with many developers focusing on 3BHK units, constituting 52% of the overall supply. Not only new project launches the year saw a decline in the inventory. There was an overall 4% decline in unsold inventory across cities in India, this year. While Hyderabad witnessed an increase for the same when looked from a short term, with approximately 50000 unsold units, but it had the lowest inventory overhang of 25 months compared to 44 months in the top eight cities, due to the high sales numbers. This is a strong indicator that property demand in Hyderabad will continue to rise in 2022. Bengaluru’s real estate demand also witnessed a positive shift, especially in June, as, despite the pandemic, the property prices in the city has remained largely stable since then. Project launches in Q3 also saw a steep three-fold rise, after a prolonged period of decline.
A brief outlook for 2022…
The real estate market is expected to reach approximately USD 300 billion by 2025 and it accounts for about 13% of India’s economy. In 2022, continued growth is anticipated in the demand for integrated gated communities and plotted developments. This is largely due to the shift in consumer preferences, owing to the lockdowns and the subsequent Work-from-Home policies. Gated communities allow residents to live in a highly organized real estate development which provides a holistic mix of housing with modern amenities, green open spaces and connectivity to commercial hubs. This model will be the future of India’s urban planning initiatives and a fast-growing segment in India’s metros, as consumers today are prioritising space, safety and wellness over other attributes. The shift to remote and hybrid work models have led more people to consider purchasing homes in the tier 2 and tier 3 cities such as Vijayawada and this will gain further momentum in 2022.
While consumer buying sentiments have changed, it is also imperative that policy reforms like streamlining of tax rates, improving liquidity, and minimising administration should be implemented immediately to ensure surplus funds for potential home-buyers. A positive start has already been provided by the RBI’s decision to keep the repo rate unchanged at 4% for the ninth consecutive time. Continuing the stance taken over the past few months, this move by RBI will help boost demand by keeping interest rates at historic low, thus aiding in the stabilisation of the housing sector. On a macro level, these reforms will enable the economy to stabilise and move closer towards complete revival and reach the pre-COVID economic level. While the current initiatives will act the much needed boosters, for the long-term growth government should focus on bringing adequate regulatory reforms. Additionally, it should look at granting the infrastructure status to the real estate sector at the earliest. To entice more home buyers, the benefit of reduced stamp duty, which is currently restricted to affordable housing segment, should be extended to mid and luxury segments as well, while extending to a 3-year period instead of the current 1 year duration.
2021 was also the year of increased technology adoption. 2022 will be the year of a more holistic growth for the segment in terms of technology adoption. It is anticipated that we will see significant growth in sustainable and green construction technology. The year will also see the sector investing in overcoming the challenges it faces while incorporating disruptive technologies by relying on strong training and development programs to get the workforce comfortable with virtual spaces, data management, and project management applications. The construction industry has a massive global impact. The industry shoulders the responsibility of being socially conscious. New technologies combined with advanced analysis & design methodologies must be explored in order to minimise the environmental impact and make for a productive and holistic 2022.