Residential demand in India could pick up in 12 months but only by the slimmest of margins, according to property consultancy Savills India. A recent Savills India research indicates that only about a fifth of prospective buyers or end-users may return to the market in a year, as per consumer sentiments that existed in May 2020.
“As expected, a significant 70 percent of end-users do not plan to purchase a home within 12 months,” said Savills’ Profiling Locked-down Homes Research Report. “Similarly, most investors plan to wait and watch, with almost 94 percent set to take their decisions after 12 months.”
‘End-users prefer integrated living’
The report states that although residential demand is currently at its lowest ebb, a gradual pick up can be expected in 12 months, once the COVID-19 impact wears off. However, this will largely be led by just 21 percent of present-day prospective end-users who will chart their return to home-buying.
“Though a minor segment, this could still be a reason for the light at the end of the tunnel,” the report said. According to Savills India, end-users as well as investors are “likely to show a higher preference for smart homes and integrated townships,” post-COVID-19.
Real estate recovery depends on policy support
An analysis of home-buying and real estate investment in the last decade has revealed several roadblocks that the market has hit, before scripting a revival. According to Savills’ data, a slump in 2015 and another one post-demonetisation in 2016 had impacted the housing market. However, small recoveries in 2018 and 2019 were apparent despite the NBFC crisis, GST rollout and the implementation of the Real Estate Regulatory Act (RERA).
“The small recoveries of 2018-19 were rooted in structural changes, size-shrinkages and average price-resets,” said the report, “The future will depend on continuing policy support and economic stabilisation. It may take until the second half of 2021 for the markets to return to a steady state.”
Will invest in mid-income housing: Motilal Oswal
Given the circumstances Indian real estate finds itself in, it comes as no surprise that investors are playing it safe when picking locations and products to invest in. CEO of Motilal Oswal Real Estate Fund, Sharad Mittal, wrote on CNBC-TV18.com that the company was looking to invest in the top seven real estate markets: NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Ahmedabad. Kolkata is a notable exception.
The plan, Mittal wrote, is to invest in mid-income housing and select partners with extra care during these uncertain times. “Our strategy is to invest in mid-income housing projects with the right partners in these cities. This segment has been the fastest growing one with the least inventory overhang over the last few years and we believe that this trend will continue in the future too.”
Developers’ ability to execute & sell will be tested
Partner selection, according to Motilal Oswal is the most important decision while selecting investment avenues, especially on the basis of a developer’s track record with projects, ability to execute and sell projects well enough. “With the liquidity crisis, developer’s ability to achieve financial closure has gained a renewed prominence in our evaluation process,” said Mittal.
The one factor that real estate funds and property consultants like Savills agree on is that recovery in the housing market will take time. Until that event occurs, it pays to play it safe and bank on an audience that will hold firm to their decision to buy or invest in real estate.
(Source: CNBC TV18)
