Residential real estate: Learn from 2021 and invest in 2022
Around 2021 – a time when residential real estate experienced a meteoric rebound from the pandemic. The need to own your own home has regained its primary importance for every Indian family. Lower interest rates and reductions in stamp duties have been the essential catalyst for the growing demand for owned housing. The pandemic has made people appreciate their homes more than ever and are now more specific about their choices.
Real estate prices have risen at a compound annual rate of 1-2% since 2014, somewhat slower than inflation and lagging behind income growth. On the one hand, while real estate values have remained stable, the average annual growth in income has been between 8% and 10%. Real estate prices were, on average, about six times a buyer’s annual income in 2000. In 2021, the average price of a home acquired by an individual was four times their annual salary.
Between 2011 and 2020, accessibility increased in all cities. A sharp drop in the cost of financing – average mortgage rates have fallen from around 8.9% in 2019 to less than 7% today, which more than offset the negative impact of lower income on affordability.
In 2021, mortgage interest rates at some banks are as low as 6.65%. At current home loan interest rates, a person could get an additional loan of around Rs 6.5 lakh. The EMI is reduced if the person decides to take out the same loan amount. The EMI would be around Rs 4,000 lower than it would have been before the mortgage interest rate cut.
On the other hand, reduced interest rates on home loans are only one aspect of the affordability issue. To attract the target audience, real estate offered attractive deals and discounts to make real estate cheaper for buyers; it was time to build customer loyalty. Several new projects have been initiated, indicating that demand is increasing in these difficult times.
In the post-COVID scenario by 2022, NRI investments in the Indian residential market are also expected to increase due to reduced uncertainty associated with the pandemic, higher currency conversion rates and increased transparency due to stricter regulatory measures. Around 2022, product design will take precedence over apartment size. An additional piece has become a mandatory preference of consumers; the exterior of the four walls (open spaces and amenities) of a house will become just as important as what is inside the four walls. The preferences of home buyers are shifting strongly towards integrated townships, commuting, shops, hotels, hospitals, schools and parks.
Over the past year, the demand for move-in units has increased in almost all segments of real estate, including luxury, affordable and mid-range housing. The share of ready-to-move-in homes (RTMI) in total primary market home sales rose to 21% in the 2020 pandemic from 18% the year before, with buyers preferring completed apartments to avoid risk associated with properties under construction.
In 2021, RTM’s sale to Delhi-NCR increased to over 25% from around 15% in 2019. However, by the end of 2021, RTM properties will have a limited supply; thus, in 2022, we will see increased demand for newly launched properties from credible and established developers. According to a recent report from ICICI Securities, the market share of major listed promoters is expected to increase from 21% in fiscal 2021 to 25% in fiscal 2024. The price difference is expected to fuel demand for goods. in construction. The industry understood this coming demand leading to an increase in new launches, which increased by around 50% year-on-year in major real estate markets.
In 2021, we learned that affordability has been a big factor for the majority of buyers. More than half of the demand for housing in the main residential markets is for apartments costing Rs 45 lakh, followed by around 25% of the demand for houses costing between Rs 45 lakh and Rs 75 lakh. Thus, 2022 will also be the year for developers to optimize costs, despite the increase in input prices, by deploying technology in most aspects of real estate and business development to ensure that the affordability of the property. property is not impeded.
(By Ashwinder R. Singh, CEO – Residential, Bhartiya Urban and bestselling author)