The residential segment was the only bright spot in an otherwise bleak 2020 for the real estate industry. Following a period of being on the back foot at the start of the pandemic, the residential segment was successful in deflecting the covid curveball, demonstrating remarkable resilience and registering massive sales in Q3 and Q4 2020, setting the stage for a promising recovery in 2021.
The residential segment is clearly thriving; according to industry sources, nearly 80% of prospective buyers want to buy a home within the next year, with 65 percent preferring ready-to-move-in homes in 2021. The desire to own a home remains strong, owing to decision drivers such as flexible payment plans, low-interest rates, discounts, and the ease of home buying with increased use of technology.
As homebuyer confidence approaches new highs, the recent budget’s extension of tax breaks for affordable housing and affordable rental housing projects, as well as the interest deduction for a year, and the RBI‘s decision to maintain repo rates will keep buyer traffic high, given favorable demographics, a shift in housing demand to lower-density markets, stamp duty reductions in Mumbai, Karnataka, and Delhi NCR, as well as low home loan rates.
Proptech companies will evolve and innovate
During the pandemic, proptech played a critical role in assisting real estate companies in enabling remote business continuity. Emerging digital technologies are increasingly being applied to the selling, leasing, and property management of real estate. This trend will gain traction in the coming months as more homebuyers turn to online real estate portals. Proptech firms will constantly reinvent themselves as developers realize the lack of proptech means a bleak future.
Housing demand momentum to sustain
The stellar performance of the residential sector in Q3, followed by an even better performance in Q4 where sales increased by 51% year on year in seven key markets, are clear indicators that this positive momentum will continue in 2021. Affordable housing will be critical in upping the ante and laying the groundwork for a thriving housing ecosystem. With the tax break, affordable rental housing projects will thrive. The mid-segment and luxury properties will see more activity as buyers upgrade to better-designed, multipurpose spaces.
Real estate consolidation to accelerate
Consolidation of demand towards financially stable developers with a good track record, execution capabilities, and high-quality projects will accelerate in 2021, and they will continue to gain significant market share as limited funding availability, squeezing margins, and shifting preferences towards larger brands drive smaller players out of business. The consolidation will make the sector more organized and will focus more on the premium segment.
Property prices to witness marginal rise
Despite economic recovery and vaccine roll-out, property prices are unlikely to rise this year. According to industry reports, the total unsold inventory in the top eight cities stands at 9.5 lakh units, and even though sales have surpassed new launches, it will take more than a couple of years to reduce it to a sustainable level. However, we may see a slight increase in prices in some pockets.
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Suburbs and tier-2 property markets to boom
Homebuyers in tier-2 cities and suburbs are seeking a better life due to the remote working culture and reverse migration. Homebuyers are looking for homes that are priced 30-40% lower than those in major cities. The cost of renting in smaller cities equates to 30-50 percent of the cost of the property. This justification for homeownership will result in a surge in housing demand in these satellite cities.
Overall, the year 2021 will be a year of optimism, growth, innovation, and investment in the residential real estate sector.
