An unprecedented pandemic, disruption in lifestyles, and a global meltdown due to companies reporting low or no growth – 2020 has hardly given us a reason for any cheer. However, 2021 does provide light at the end of the proverbial tunnel, especially for the real estate sector. With policy changes like RERA/HIRA compliance for small developers, the introduction of GST, and demonetization, homebuyers have many reasons to celebrate.
- Average home loan rates offered by leading private banks are around 7%, the lowest in the last 10 to 15 years.
- Repo Rates (RBI lending rate) is low and constant at 4% and are not expected to go up very soon. Low repo rates mean loans at competitive rates for customers
- Given the income tax benefits U/S 80C and Section 24, homebuyers enjoy even lower rates.
- Inventory overhang is the time taken by developers to sell current stock. The inventory overhang has gone up from 27 months in December 2019 to 47 months in December 2020.
- City-wise, NCR has the highest inventory overhang at 72 months or 6 years followed by Mumbai and Pune at 55%. Inventory overhang in Kolkata saw a decline due to demand.
- Inventory overhang has resulted in prices remaining stagnant or coming down
- With stronger regulations due to RERA/HIRA, small-time, unorganized developers have been forced to become more compliant, transparent, and better execution in their operations. Those who have failed to raise their standards have had to leave the market.
- Further consolidation is expected in the property market I 2021. Buyers can expect organized, well-funded developers with superior reputations and get better deals. The chance of homebuyers being taken for a ride is lower.
- Online real estate aggregators like 99 acres and Magicbricks have made home buying easier with buyer reviews, ratings, and social media comments.
- The pandemic has changed how offices function, with most companies offering work-from-home options to employees. This has made spacious homes a priority for home buyers and developers are offering multiple options to them.
- According to a PropTiger survey in December 2020, 78% of respondents wanted to buy a home in the next year and 47% indicated they wanted a larger home.
- There is also a preference for buying over renting since work-from-home options are anticipated to be a long-term trend. There is a preference for ready-to-move-in property
- Some states like Maharashtra and Karnataka have received benefits from the Government in terms of lower stamp duties
- If the selling price of the property is the circle rate by 20%, the government has waived income tax penalties
- PM Awas Yojana: Affordable homes (within Rs. 45 lacs as per the IT Act) are being promoted through this scheme.
The pandemic has changed the outlook of homebuyers with preference now moving towards gated communities that offer security, quality construction, larger flats that accommodate work-from-home options, and competitive rates.
Given movement restrictions, home buyers are looking for gated complexes that offer exercising facilities and open spaces. Maintenance and hygiene are also a priority.
Overall, it is expected that demand for property will be robust in 2021 and homebuyers will be the biggest gainers.