The pent-up demand for residential real estate manifests itself
The pent-up demand for residential real estate is manifesting itself, with the sector showing signs of gradual improvement and supply slowly accelerating to meet the aspirations of homebuyers. The figures for June are encouraging in terms of inquiries generated and gradual increases in property prices in several locations across the country.
After suffering tremendously, especially over the past and a half years due to the outbreak of the COVID-19 pandemic and the ensuing national lockdown to control the spread of the coronavirus, the real estate market has started to recover, thanks to the calibrated and practical approach taken by the Center and state governments to deal with the second wave of the pandemic in April-May.
Much of the pain of the second wave of the pandemic has been avoided because unlike the first wave, the government has refrained from a total lockdown to deal with a sudden spike in coronavirus cases. The partial closures and the rapidity of vaccination have largely prevented the mass exodus of labor as well as the complete cessation of construction works.
With the second wave of the pandemic easing, homebuyers got out and started looking for properties that fit their budgets and preferences. You don’t have to look at the statistics to find out what’s going on in the market, but a quick glance at the real estate ads in the newspapers indicates that something positive is happening in the real estate industry.
According to PropTiger’s quarterly report ‘Real Insight (Residential) Q2 2021’, half of sales for the April-June 2021 quarter were in June itself, as states began to open up and remove movement restrictions. This is mainly due to the fact that the second wave of the pandemic peaked during the months of April and May, resulting in a considerably high number of infections and deaths. The situation improved markedly in June and therefore the residential real estate market. The momentum, if not interrupted by the third wave, is expected to continue at an accelerated pace in the coming months.
Although the improvement is complete, the affordable housing segment continues to be the main focus of Indian real estate developers. This is clear from the fact that the majority of the new offering was concentrated in the mid-segment. In fact, 35% of projects launched in the second quarter were in the price range of Rs 45-75 lakh, the report shows.
Unlike previous trends where Mumbai and Pune dominated new launches, Hyderabad proved to be the leader of the new procurement category in the second quarter of 2021, contributing 40% to the total pie, the report adds.
Hyderabad recorded more than 8,800 new units launched during the quarter, followed by Bengaluru with 3,400 units. Southern cities (Hyderabad, Bengaluru and Chennai) together contributed 58% of global launches in the second quarter of 2021. Mumbai and Pune together contributed nearly 26% of global supply.
On the sales side, there is an increased preference for completed or nearing projects, with buyers being cautious about the risk associated with late projects. On the positive side, however, during the second quarter there was a slight decrease in the share of ready-to-live-in housing (RTMI) in total sales volume. This bodes well for builders who are working overtime to complete current projects.
RTMI segment sales contributed 16% of overall demand compared to 21% in the previous quarter. During the quarter, Chennai and Delhi NCR recorded peak residential sales in the RTMI segment, while Hyderabad accounted for a 6 percent share of this segment’s demand.
With the rapid vaccination campaigns and favorable monetary measures, and the last signs of recovery in June 2021, buyer sentiment is expected to remain positive and induce the long-awaited recovery in the real sector. However, a complete turnaround is still far away, and the market will be in a wait and watch mode, only serious end users will positively culminate their home buying decisions.
(By Rajan Sood, Business Manager, PropTiger.com)