Will festive season 2022 be any different for Indian realty?

Historically, every festive season has been a time of optimism and hope for Indian real estate, even though actual numbers may not back the pre-festive bullishness. After all, real estate is a sentiment-driven business and the stakeholders try their best to create an ambience of positivity, to bring fence- sitting buyers back to the market, often with festive discounts and freebies.

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Festive season 2022: What can home buyers expect?

Amit Goenka, MD and CEO at Nisus Finance, says that developers are rushing to get all the appropriate and requisite approvals and doing all the marketing and sales groundwork required for mega project launches this festive season, starting with Dussehra. The expectation within the industry is that this year will be a bumper season and record sales will be registered. This is further enforced by reasonably good sales even during the monsoon season, which is traditionally a slow season for the industry.

“There is considerable euphoria in the stock market and this optimism percolates strongly in real estate too. We may see a slew of new launches this festive season and consumers may look forward to exciting offers in prime locations across the major metropolitan markets. Similar sales may be predicted in plotted projects across the country, including tier-2 and tier-3 markets. We expect the mid and premium segments to do significantly better than affordable housing projects,” says Goenka.

Impact of rising home loan interest rates on property purchase

Aditya Kushwaha, director and CEO of Axis Ecorp, has a different view. The only short-term hurdle, is the increase in home loan rates that reduces buyers’ eligibility. For example, someone who could have borrowed Rs 1 crore can now borrow only Rs 90 lakh. However, overall buying behavior will be bullish,” says Kushwaha.

Abhishek Kapoor, CEO of Puravankara, is quite optimistic for this festive season. “Although a rate hike dampens the spirit, we believe there will be a lot of new launches this time around. I do not think there is any fear factor. I feel that among the BRICS nations, we in India have managed ourselves very well. Private investments are going up, job opportunities are looking good, government spending is continuing and inflation is very much in control, compared to the rest of the world,” says Kapoor.

How important will sentiment-driven buying be?

Ashish Narain Agarwal, founder and CEO, Property Pistol, points out that in India, owning a home is considered to be one of the most important decisions in an individual’s life and hence, the factor of buying a house in an auspicious time takes precedence. “Currently, Indian real estate is bullish with demand-supply movement going strong and hence, the festive period can be a great opportunity for an increase in sales. While comparing with the previous decade, the real estate market has evolved and the last two years were resilient, with low interest rates and stamp duty rebates. Q1 2022 has witnessed increasing momentum with buyers being affirmative on property investment. A few factors, like higher stamp duty and interest rates, are temporary scenarios that may not dampen the spirit of buying a property for a well-informed property seeker.”

Also read: Indian realty suffers from low consumer satisfaction, shows Track2Realty’s C-SAT score

Macro-economic factors: Is this a good time to buy property?

As the festivals approach, a high rate of economic growth (around 7.5%) amid rising inflation (WPI of 14%) are the main reasons behind robust demand for real estate. Industry insiders assert that real incomes have grown faster than housing prices (around 3%) leading to perceived affordability of homes. The one exception to this is the PMAY segment, where demand may be muted due to lower disposable incomes, because of food inflation and this is evident with the slowdown of affordable housing projects in recent months.

One interesting aspect to be seen during the festive season would be the architectural changes, vis-à-vis design and functionality. Post-Covid, in the emerging reality of work from home, many new projects may attempt to woo buyers by providing functional office-cum-home. Of course, it will come at its own cost – either with the bigger homes or with reduced size of other rooms.

Although prices may not rise, the increase in input cost may force developers to cut down on their margins. Overall, festive season 2022 could well define the future of Indian real estate for the next two to three years.

(The writer is CEO, Track2Realty)

Festive season 2021: Factors that could boost India’s COVID-hit realty market

Will the festive season of 2021 change the course of real estate in India? We examine…

October 7, 2021: The festive season of 2021 is the first one after the reopening of markets following the COVID-19 pandemic. Understandably, the optimism in Indian’s real estate industry is palpable. Even though real estate, owing to the large ticket sizes associated with it, has so far not been part of the cyclic upswing of asset classes, it is anticipated that this sector may steal the show, now that the stock market rally has reached its peak. Does this mean that the festive season of 2021 can change the course of real estate in India? This is a question most analysts are curious to have the answer to.

While the festive season has just started, it is too early to estimate the exact sales volume and value growth at this point of time. Nevertheless, there seem to be enough catalysts to give rise to optimism, rather than pessimism. How far this optimism is sentiment-driven and to what extent the economic fundamentals support the business take-up, remain uncertain.

Catalysts of housing absorption

Gradual reopening of markets and businesses
Stagnant property prices
Low interest rates
Availability of ready-to-move-in inventory
Festive discounts
Anticipation of correction in overheated stock markets

What could discourage home buying?

Job market uncertainties
Stagnant salary or salary cuts
Inflation and reduced household savings
COVID-19 third wave

What should home buyers do?

Property prices are attractive but one should not over-leverage.
Consider property investments from a long-term use perspective and not for temporary work from home
Opt for home buying only if your job/business is stable
Borrow as less as possible and ensure that your debt-to-income ratio is not be more than 35%-40%.
The loan-to-value ratio (LTV ratio) should not exceed 60%.
More than festive discounts, look at the overall value proposition of the property.

Festive season 2021 impact on luxury and mid-segment housing

In terms of sales, 2021 has been great for the developers. In spite of the second wave of the Coronavirus pandemic, there was a 67% jump in sales in the residential real estate sector in the first half of 2021. Aditya Kushwaha, CEO and director, Axis Ecorp, believes this momentum will continue in the coming months and there will be a 30%-35% increase in sales. He points out that the market has had its share of ups and downs post the pandemic and the festive season, which starts from October, will bring cheer to the segment.

“Factors such as low bank interest rates, stamp duty cuts in some states and demand for larger/spacious homes to accommodate remote working, have been instrumental in driving sales in this sector. Certain sectors such as holiday homes, luxury homes and affordable housing will continue to outperform. We believe that the luxury housing market and the holiday home market will get a good boost during festive times. However, the mid-segment residential market may continue to be shaky even in the last quarter of 2021,” says Kushwaha.

Factors that may boost housing sales during the festive season

Vipul Shah, MD, Parinee Group, agrees that despite the anticipation of a third wave, housing and commercial real estate sales in the third quarter of 2021 have risen significantly. Although the gradual reopening of the economy has led investor sentiment towards the real estate sector to slowly turn around, it is the festive season that would prove to be the real catalyst.

Sales across top property markets are predicted to witness a sequential rise in the ongoing festive quarter of October to December, led by favourable incentives and schemes offered by developers around this time. This, coupled with record-low home loan rates and moderated property valuations, are expected to further revive the demand for residential units. “Understanding the value of home ownership in the backdrop of the pandemic and the added benefits of festive discounts, have managed to create a positive outlook among buyers now,” says Shah.

Festive season offers that can attract home buyers

Vinit Dungarwal, director, AMs Project Consultants, says that home sales surged 113% in the top seven cities even as prices rose in the month of September. This momentum is expected to continue in the coming festive season. Not only will there be interesting launches to look forward to but developers will also be introducing lucrative offers for consumers. To sweeten the deal, developers will have to offer not just reduced pricing on the properties but also make options available that do not demand a high upfront payment. Another good option would be to offer multiple payment options to prospective buyers.

“Factors such as the depreciating rupee and low-interest rates on home loans, have contributed to growth in a significant manner. All of these have improved the attractiveness of real estate as an investment asset class against other traditional alternatives. Last year, the celebrations were subdued. However, this year, people are looking forward to the festivities and this will help drive sales. Amid the ongoing COVID-19 vaccination drive, discount offers, new residential options and a host of subvention schemes in the market, developers are betting big on the upcoming festive period,” adds Dungarwal.

Following a lacklustre festive season in 2020, the base level is pretty low and naturally, the expectation is that real estate will bounce back this year. A post-festive season analysis of sales will define to what extent the optimism translated into the purchase commitment. Nevertheless, even a pre-COVID level of sales would be a big bounce back for a sector that has witnessed disappointments during the festive season of the last few years. A lot will also depend upon the sales strategy, as the biggest challenge continues to be how to lure people towards festive offerings. After all, it is a fiercely competitive market now and developers need to reinvent to remain relevant.

(The writer is CEO, Track2Realty)

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Ravi Sinha

Ravi Sinha is a journalist with nearly two decades of cross-discipline media exposure. He is the CEO of real estate think-tank group Track2Realty. He has been writing extensively on the real estate sector for nearly a decade. Evaluation of real estate brand performance is his expertise and he has immense insight into consumers’ psychograph in the property market.

Twitter: https://twitter.com/ravitrack2media