by Dr. Niranjan Hiranandani, National President NAREDCO and MD - Hiranandani Group
As we come to the end of a year which will be hard to forget, the knowledge take-away of 2020: Faced with a challenge like the Covid-19 pandemic, that the safest place to be is in one’s own home. The year 2020 was a year of challenges. It was, in the words of the Indian Prime Minister, about ‘saving lives; then livelihood’. It will be remembered as the year when the main challenge was of ensuring survival; of changing marketing and sales outreach to digital platforms, enhanced automation at construction sites, of consolidation across real estate companies getting a heads-up, of a new buyer profile which was created by the ‘new normal’ – and a new paradigm for homes, where safety and security with a specific perspective of the pandemic gained prominence. On the positive side, home loans at historic lows and positive moves from authorities such as a time-bound stamp duty reduction in Maharashtra, which was matched by developers who are members of NAREDCO, in effect creating a ‘zero stamp duty’ situation for the home buyer. All said and done a challenging year of resilience when the survival instinct of real estate as a business was tested to the halt. Residential real estate started its turnaround from mid-August. From then onwards, each month going by has recorded a higher number of transactions being registered, which points to better days ahead.
The turnaround in housing is reflected in the data on registration from stamp offices across states like Maharashtra, were compared to 1.9 lakh documents registered in September 2019; the corresponding figure for this year’s September was 2.47 lakh. While 1.93 documents were registered in October 2019, in 2020 the number of registrations rose to 2.73 lakh. Over the first 13 days of November 2019, 88,000 registrations took place. The corresponding numbers during the first 13 days of November 2020 are 1.21 lakh. Property registrations in states like Maharashtra reflect a YoY increase of 36 per cent in the period September - mid-November 2020, as compared to the corresponding period in 2019. Not just that the numbers are better than last year, each month is seeing better numbers as compared to the previous month.
Mission Unlock and the stimulus packages announced by authorities resulted in residential transactions having picked up at a higher pace compared to commercial. With commercial, there are sub-segments which will take a longer time for recovery as compared to the overall average. Off-take in commercial real estate largely depends upon the economic growth story; as GDP numbers improve, we should also see positive trends from commercial real estate.
Bucking this trend are sub-segments like data centers and warehousing and logistics; both these sub-segments have done well through the pandemic induced lockdown as also ‘Mission Unlock’. Hospitality, organized retail, and entertainment/eating out are witnessing cautious reopening; it should take the vaccine being effective, for these sub-segments to get back to near-normalcy. Office spaces have seen minor adjustments, as ‘work from home’ was compensated by lesser number of human resources working from existing office floor spaces; while work from remote locations has opened up requirements for co-working spaces. So, “goodbye 2020” for real estate in India is a mixed bag; ‘Hello 2021’comes with its share of challenges. The uptake in residential through ‘festive season 2020’ has been growing each month, but the test will be sustaining the growth rates as we enter 2021. In states like Maharashtra, the stamp duty reduction will become a tad less attractive; the matching scheme by NAREDCIO member developers, which effectively created a ‘zero stamp duty’ situation for home buyers till 31 Dec 2020 will change. The impact of these sweeteners reducing will obviously, be visible as we go into 2021. It will be a situation where the smart home buyer ensured taking advantage of the special offers, while those who miss the bus will get a lesser sweet deal – but home buying will sustain into 2021.
Shelter is a basic need; given this reality demand for housing will always exist. The ‘new normal’ has brought in a set of paradigm changes in what constitutes the ‘ideal home’; in a world where humankind co-exists with challenges like Corona. These changes are being implemented in on-going and future projects, and we should see demand for homes continuing to grow. From mid-August 2020, a large chunk of fence sitters and renters turned into actual home buyers; it led to a spike in demand trends. This spike will gradually turn to normal as we enter 2021, and going ahead, the demand graph may not spike – but it will definitely continue to grow.
Commercial real estate should also gradually recover, with the vaccine bringing in near normalcy. We have seen positives in terms of stimulus measures announced by the authorities; states like Maharashtra have promoted new investments which in turn, will enhance demand for real estate across segments.
As we make the shift from 2020 to 2021, we begin on a positive note: buyer sentiment has improved through the festive season. Government spending has been on an upward curve all through the pandemic, and the positive impact on the economy should be visible as we enter 2021. Real estate enters 2021 with ‘Optimism’ and ‘Hope” being the watchwords.