Despite the nationwide pandemic and the economic uncertainty and rising stock market volatility that came with it, there has been a sequential growth of 51% in the residential sales during the last quarter of 2020, according to the recent report ‘India Real Estate Outlook – A new growth cycle” by JLL. While there is still a long way to go, the worst is behind for the residential sector.
The evolving COVID-19 pandemic has influenced short-term decision making with job security cited as the biggest concern when contemplating the purchase of a home. “In the second quarter of FY 2020-21 when the GDP showed higher than expected recovery, the housing market showed some initial signs of recovery, with sales increasing by 34% on a sequential basis. In Q4 2020, uncertainties around the economy and jobs started reducing, which led to an increase in the pace of recovery in residential real estate. New launches and sales across the seven key markets under review witnessed a significant jump,” Dr. Samantak Das, Chief Economist and Head Research & REIS, JLL.
The challenges faced by residential real estate in 2020 have become the catalyst in providing stimuli to the industry for sustained growth. With people spending an inordinate amount of time at home, the lockdown re-established the importance of owning a house. Simultaneously, government initiatives to support the recovery by holding policy rates at historically low levels to initiate a cycle of consumption led growth. This has resulted in extremely low mortgage rates. And, prices have also been stagnant for the past few years. This affordable synergy makes it a great time to purchase a home. Furthermore, the market is also witnessing renewed interest from Non-Resident Indians (NRIs) impacted by economic uncertainties in Europe and the Middle East.
“With economy picking up and employment witnessing stability, housing sale is expected to sustain the existing momentum for the year 2021. All segments, which includes luxury, premium, mid-segment housing, and affordable, will see renewed demand from the end users. With the property prices bound to go up because of the rising demand, investors are likely to come back to the market by last quarter of 2021,” said Siva Krishnan, MD & India Head, Residential Services, JLL India
In 2021, a further improvement in sales across all housing segments is expected. However, development focus on mid and affordable segments is expected to continue. In 2020, more than 80% of the new launches were in the sub Rs 10 million category. Moving ahead, new launches will remain concentrated in these price segments with developers trying to reap the benefits of strong pent up demand in these segments. The Government is also committed towards boosting affordable housing. The recent Union Budget has extended the benefit of additional interest deduction on home loans for first time home buyers in the affordable segment. Further, there is a time extension to claim the tax holiday on profits from affordable housing projects until March 2022.