Why Should You Invest in the Indian Real Estate Market in 2021?
Real estate is among the pallbearers of the Indian economy. According to a Niti Aayog, the sector is currently worth $120 billion and will reach $650 billion by 2040. It is the second-largest employer after agriculture and supports approximately 220 ancillary sectors. Real estate and gold have been a sought-after investment class since times immemorial owing to prospects of steady price appreciation and lucrative returns.
The conducive policy reforms such as RERA, GST and demonetization have infused transparency and accountability into the system. The Smart City Project will also be instrumental in ushering a socio-economic transformation of the urban landscape until the pandemic struck and brought the sector to a standstill for a few months. Nevertheless, prudent measures such as the extension of the deadline for construction of real estate projects, three-month moratorium on loans and slashing of repo rate and reverse repo rate laid the path towards recovery. A Proptiger (property portal) report highlights that residential sales witnessed 85% growth in Q3 2020, as compared to the previous quarter (October 2020).
The onset of 2021 with the vaccination drive against COVID-19 has instilled a wave of optimism. Nevertheless, it has ushered a new normal for the world. The extended work from home and wellness concerns has necessitated spacious homes with a segregated office workstation. A recent Anarock (real estate services company) report has highlighted that average apartment sizes have increased by 10 percent Y-O-Y in seven major cities from 1050 sq. ft. in 2019 to 1150 sq. ft. in 2020. Furthermore, Tier 2 and Tier 3 cities have emerged as the sunrise destinations for real estate investment due to rapid infrastructural developments, push by government and relative affordability per sq. ft.
The NRIs are also eyeing investment back home in the real estate owing to diminishing prospects in alternative asset classes like mutual funds or the stock market
Moreover, the NRIs are also eyeing investment back home in the real estate owing to diminishing prospects in alternative asset classes like mutual funds or the stock market. As per the Reserve Bank of India's Housing Price Index, there has been an average annual increase of 11.6 percent in the ten leading cities since the past decade.
The festive season in 2020 has already set in the euphoria of revival with 75-80 percent surge in residential sales. Contrary to popular perception, this demand is driven by end-users. A Savills (global real estate services) report foresees real estate to attract investment worth $6 billion in 2021. The prospects of economic stability amid the vaccination drive against COVID-19 and pent-up demand augurs well for real estate to embark on the growth path.
Proposed infrastructural developments such as the Delhi-Mumbai Industrial Corridor, the Delhi–Meerut Rapid Regional Transit System (RRTS), Metro operations will have a spillover effect on real estate. Moreover, the home loan interest rates are at an all-time low and are likely to remain so in the coming months, as RBI tries to maintain an accommodative stance. A Knight and Frank (international real estate agency) report titled 'Prime Global Forecast 2021' foresees a moderate price correction in residential real estate.
Nevertheless, COVID-19 has redefined some trends in the sector. With health and hygiene concerns looming large, the organized real estate developers will invariably benefit from this phenomenon. Customer centricity will be the key to building and maintaining a loyal consumer base. Homebuyers will be willing to extra mile to consider wellness and sustainability in choosing their dream home. Technology will emerge as a panacea to boost efficiency, undertake innovation and enhance the customer experience. Gated and integrated self-sufficient township with residences and robust facility management services will be sought-after offerings.
The government has already given a formidable push to real estate through futuristic policies. The upcoming Union Budget 2021-22 is around the corner. Much, however, hinges on how far it builds upon the momentum.