Buying a home has always been culturally significant in Indian ethos. Following a sluggish couple of years, real estate in India has shown signs of upward trajectory, particularly on the back of COVID led demand for homes. The pandemic made us realise the importance of having a safe haven for our loved ones, while the work/school from home made us relook at our living arrangements.
According to a recently published report by Anarock, as many as 58,290 homes were sold in the top seven cities in Q1 2021 compared to 45,200 units last year. Mumbai Metropolitan Area (MMR) and Pune together accounted for 53% of housing sales in the quarter. With MMR sales hike by 46% annually, the demand for real estate in Mumbai has been higher compared to other markets with highest yearly reduction in unsold inventory of 8%.^ According to the Anarock report, Mumbai reported 41 % change in terms of unit supplies in this quarter vs previous year Q1.
|City-wise supply (in units) and Q-o-Q percentage change|
|City||Q1 -2021 (Jan-Mar)||
|% Change (Q1-2020 Vs. Q1 2021|
Source: Anarock Research
Spurt in demand for affordable and mid-income housing here to stay
In the wake of COVID-19, there has been a sharp growth in demand for large homes that can accommodate workspace; and also there is an increased preference for ready-to-move-in homes. Consumers are leaning towards tier 1 developers, even though they may have to pay a premium, as they want to be assured of quality and timely delivery. Growing preference is also for homes in integrated township projects, which are built to be self-sustaining ecosystem equipped to meet all major needs of its residents. The affordable and mid-income housing segment, in particular has witnessed robust growth.
Developers like Lodha Group who have a good offering of projects in affordable and mid-income housing saw 58% of its Rs. 9,900 crore sales over FY20-9MFY21 come from the affordable and mid-income segments, as per a report by Jefferies India Pvt Ltd. The IPO bound Lodha Group holds a track record of 50,000 Cr. (INR 500 bn) sales in the last seven years with 570 Lakh sq. ft delivered followed by Godrej (INR 285 bn) and Prestige (275 bn). On average it completed 109 Lakh square feet over financial years 2017 to 2020, of which an average of 77 Lakh square feet is attributed to affordable and mid-income housing.
With Mumbai being the entertainment, fashion and financial capital of the country, it accounted for 6% of India’s GDP and INR 1.91tn in corporate taxes in FY2020. Existing and planned infrastructure will further fuel the city’s growth and it will continue to be top choice for job seekers from across the country. With population of ~20mm in the urban agglomeration, the demand for housing, especially in the affordable and mid-income segment, is bound to rise. The real estate industry is at an inflection point and could potentially see a disproportionate growth vs. expectation.
For those looking to invest in real estate, this is a favourable period. The pandemic has exposed the uncertainties and volatility that markets are subjected to and therefore the risk associated with equities. This has to an extent shone spotlight on real estate, especially from an investment perspective. Considerably stable compared to equities, real estate also tend to provide higher returns in the long term.* Also, with reduced home loan rates, the gap between the net cost of home ownership and the rental yields is amongst the lowest in last two decades.
Sources: *Indicated by a study undertaken by Jordà-Schularick-Taylor Macrohistory Database funded by the Institute for New Economic Thinking (INET). ^ https://www.livemint.com/news/india/housing-sales-overcome-covid-19-blues-surge-29-in-q1-survey-11616654504863.html
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