After the Coronavirus pandemic, a lot has changed in India’s housing market in 2021. After weathering the storm in 2020, the sector appears set for a comeback. We list some of the factors that may influence how the Indian real estate market performs in 2021.
Flat growth likely in property prices in big cities
Since the property price boom of the 2010s, property values have experienced subdued growth. The current conditions are likely to limit any growth. While buyers should not expect significant upward movement, they should also not expect rates to fall greatly. Property prices will largely remain flat in 2021.
Interest rates will continue to be low
Because of high inflation, the Reserve Bank of India (RBI) has left the repo rate unchanged at 4% after generously lowering it in successive cuts. While further rate cuts are unlikely, given the apex bank’s tightrope walk in maintaining a balance between boosting demand and keeping inflation within its comfort zone, the chances of the RBI raising rates are also slim. Home loan interest rates would thus remain in the sub-7 percent annual interest range for the majority of 2021. Buyers who want to take advantage of a low-interest-rate environment must act quickly to complete the transaction.
Ready-to-move-in properties will attract more buyers
Buyers will continue to prefer ready-to-move-in properties over under-construction projects as they look to avoid construction delays and seek homes where they can immediately set up a comfortable and secure space of their own.
Some states may lower stamp duty rates
Some states have already reduced their stamp duty rates in 2020 in order to attract buyers. Maharashtra, Karnataka, and Madhya Pradesh are among them. As a result of the reductions, property registrations in Maharashtra reached pre-COVID-19 levels in the second half of 2020. Lowering stamp duty will thus be an important tool for increasing demand. Some states are reducing stamp duty rates due to several calls for action, including Uttar Pradesh, Haryana, and Punjab.
Tier-2 and tier-3 cities and peripheral areas to see value appreciation
More people will settle in tier-2 and tier-3 cities as reverse migration allows a large portion of the working population to work from home. Because housing developments are typically concentrated in city centres, which have limited space, new real estate developments would emerge in their outskirts, positively influencing their pricing. The success of these developments, however, will be determined by the infrastructure support provided by the state government to these areas.
Consolidation to increase, small players to exit the market
If the Real Estate Act (RERA) eliminates a large number of small players from the market, further real estate consolidation is likely, with the pandemic severely affecting the businesses of several mid-segment builders. Due to the liquidity crisis and the legal obligation to commit to delivery timelines, these builders may be forced to close their doors. In contrast, established players with strong finances will see their footprint grow as smaller cities become new hotspots for housing.
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Housing to remain a buyers’ market
For the foreseeable future, India’s housing market 2021 will be a buyer’s market. Developers must therefore be willing to negotiate deals on terms that are not favorable to them. In order to increase sales numbers, builders need to devise new strategies as well as offer cost savings to buyers. A new launch is especially risky because the risk is generally much greater than in a ready-to-move-in apartment.