Perhaps the most important high point of 2021 for the Indian residential real estate market was that the real estate business did not come to a standstill despite the second wave of the pandemic, and shown resilience to come back from the lows of the uncertainty.

The year 2021 saw housing demand emanating from first-time homebuyers being supported by stamp-duty cuts in some States such as Maharashtra, Karnataka and West Bengal and multi-year-low interest rates. Larger and listed real estate developers reported a strong performance, as the trend of consolidation in the market continued.

While the housing demand trend is expected to remain in an upcycle in the near term, market-share gains for larger developers may accentuate the pressure on smaller developers, who had already been impacted by various regulatory developments in the sector over the last five years, say real estate experts.

Prices in 2021, too, by and large, remained stagnant and in some markets developers provided moderate price discounts to kick-start sales, thereby facilitating cash flows to tide over the crisis in the short term.

The resilience with which the market came back from the lows of the uncertainty emanating from the Covid-induced lockdown led to an excellent first quarter in 2021.

“Historically low mortgage rates, preference for owned homes, rising affordability and select stamp duty cuts led to the surge in demand, which helped the sector sustain through the second wave of Covid-19 and recover even more quickly in the post-Covid environment. The signs of recovery have also been captured in recent surveys, which highlight that the online property search volume in September 2021 has already surpassed the past historical peak of September 2020,” said KT Jithendran, CEO, Birla Estates.

Impact of the second wave of Covid-19 on housing demand

The impact of the second wave, according to experts, was lower than that witnessed in the first wave due to various factors, including many salaried employees continuing to work from home, more localised lockdown restrictions, and a higher degree of certainty regarding future income levels and stability compared to the complete lockdown following the first wave.

“Perhaps the most important high point of 2021 for the Indian residential real estate market was that the business did not come to a standstill despite the second wave of the pandemic. This indicates that the steep learning curve induced over the last two pandemic years has led to superior business practices and an overall stronger housing market,” said Anuj Puri, Chairman, Anarock.

Residential Trends in 2021

Home-buyers preferred ready-to-move in homes: With the pandemic-infused economic stress and uncertainty, buyers became risk averse. There was a preferential shift towards residential properties that were ready to move in, or projects that had a low completion cycle. Buyers also gravitated towards smaller projects and individual plotted developments rather than large projects that would take a longer time to complete.

Preference for developers of repute: There was also a noticeable preference for builders and developers of repute and a good track record with regard to project development, pushing aside developers with a questionable reputation.

According to ICRA, this led to increased market share for the top nine listed realty players, from 6 percent of sales in FY2017 to over 16 percent in FY2021.

The long-term trend of consolidation in the market, which has been the result of evolving consumer preferences as well as a sustained increase in the market share of large developers among recent launches, is likely to continue and will support further improvement in the market share of larger and stronger developers, the ICRA analysis said.

Top listed and non-listed developers with good corporate governance practices, financial accountability, trust, and a brand name witnessed very good sales. There is a clear trend emerging wherein homebuyers are willing to pay a reasonable premium for the products being offered by reputed players, according to an analysis by Anarock.

Source: Money Control (