Byline: Soumya Sehgal
Giving credence to a recent Crisil report, the country’s housing market is expected to grow by 5-10 percent in the current fiscal year. A lot of it can be credited to intermittent lockdowns, improved affordability and continuing work-from-home set up in the top six cities. However, absolute demand is expected to catch up with pre-pandemic levels only after fiscal 2023, the report further revealed.
At a recently held Realty Plus – VCWxRE Investment Virtual Summit 2021, it hosted eminent personalities from the real estate sector, giving us a fair understanding of the different facets of the sector’s growth in the past two years, as well as how it is expected to shape in the future.
While green shoots were appearing to be visible, things went unfavorable after wave 2, especially in the residential sector. Giving us a sense of the current state of this market, Irfan A. Kazi, Chief Investment Officer, SWAMIH Investment Fund, SBICAP Ventures explains that the industry witnessed some contrasting impacts. “There was misery amongst developers, the market was segmented more than before, costs were increasing and it was difficult to get the labor on sight. While large developers took this in their stride, the situation for the small developers was challenging. I don’t say this from any stats, but the on-ground reality.”
Amit Bhagat, CEO & MD, ASK Property Investment Advisors also admits the stark difference between what was in the news and the on-ground reality. “Industry needs a breather as the compounding of the debt is increasing. The collection has definitely been impacted and this is further impacting the execution part. In the year of the pandemic, developers’ collections haven’t surpassed the previous year. Lenders are sweeping and cost has increased after the 2nd wave and there is no relief to any developer. Large developers have still managed to survive through access to QIPs and bonds.”
Sharad Mittal, CEO, Motilal Oswal Real Estate agrees with the other panelists, but in parts. He states, “When the pandemic started, people were unknown and uncertain of its impact. Green shoots that we see in the headlines are in terms of what people were expecting of how it will turn out to be.
If we are able to sustain these green shoots, maybe in the next 2-4 years, there could be some meaningful recovery. Interest rate is going to the biggest driver to augment this green shoot. Almost 50% mortgage rate will invite consumer interest in buying properties. Next, a large part of sales is cornered by the top 30 developers because of each of these markets. Hence, consolidation will accelerate.
What surprises me is how quickly we have reached pre-covid numbers, along with a gradual recovery in pockets.”
Ashwinder R Singh, CEO-Residential, Bhartiya City feels that on the demand side, pocket rates are at an all-time low. However, savings have gone up due to the pandemic.
Financers who have funded developers, not at the land stage, are doing well because the developers intrinsically carry very good credit.
I see reference sales and direct sales increasing because the consumer has himself started evaluating the developer and visiting the site, especially the second-time buyer.
I believe the demand is good and the majority of the developers understand how to go about it and not boil the ocean. Certainly, a handful of developers are not doing so well because the consumer choice has become a key differentiator.”
Amit Goenka, MD & CEO, Nisus Finance Services asserts that the first wave was a black swan event for the entire global communities. However, it cushioned the economy through various interventions by RBI, finance minister and other regulators. A lot of money was infused to provide covering during this time.
More such intervention was seen 2nd wave that led to the exposure of the weak links in the system, which otherwise were not exposed to that level.
“We are seeing a lot of new capital being pumped in the residential sector, making a pre-line for Indian real estate again. This is clearly intended for large scale players but even the smaller players will continue to benefit from this capital and resilience,” he adds.