The city witnessed 26% increase in home sales in the last quarterdemonstrating solid demand- coupled with corresponding decline in inventory, the possibility of price increase in the coming months and quarters is significant
The spread of the pandemic and the subsequent lockdowns last one year cast uncertainties across sectors including real estate. However, when the unlock phase began, real estate proved to be one of the sectors that was quick to bounce back. With home being the centre of all activities, the pandemic heightened the consumer desire for bigger and better homes. Moreover the uncertainty quotient for the sector reduced with consolidation in the market. Customers started preferring reputed developers since the element of trust and assurance of quality and delivery was a given. Financial benefits such as lowest interest rates in a long time and the stamp duty cuts in Mumbai presented a golden opportunity to customers wanting to buy a home and this resulted in record sales.
Mumbai market showed robust growth
Mumbai the financial capital of our country has always been at the forefront in terms of both demand and supply of real estate. With a booming urban population, Mumbai will continue to see a sustained demand for good quality housing projects from not just first time home buyers but also those looking to upgrade their lifestyle. As a market it has always been one of the top markets for investors owing to the decent rental yields.
Given the favourable factors, during the Oct to Dec 2020 and Jan to Mar 2021, developers across top tier cities in India reported robust sales. As per a report released by PropEquity, sales or absorption of housing units rose by 21% across top 7 cities in India in Jan to Mar of 2021 to 1,05,183 units versus 87,236 units in Jan to Mar 2020. Mumbai region witnessing an increase of 26% in home sales in the same period at 41,323 units.
While the second COVID 19 wave and the resultant lockdown in the state may have put a halt in this upward momentum, experts are of the opinion that it’s a temporary lull and there is a latent demand which will convert to sales as soon as people are able to visit sites. The sales momentum will also be supported by the interest from the NRI market. As per a report by 360 Realtors, NRIs invested $13.1 billion in the Indian real estate market in FY 21 and this is further expected to grow at 12%. The reduced home loan rate as well as the weakening of rupee has presented a good opportunity those residing overseas to invest in real estate in India.
Decline in inventory plus rising cost of raw materials could result in price rise
Given the fact that the market has witnessed consolidation post the NBFC crisis of 2018, increasingly we will have only the top developers launching new projects in the market. This will further ward-off the chances of surplus inventory crowding the market and may drive up prices. The report by PropEquity pegged a 40% decrease in new supply or launches of housing units in Mumbai in January-March 2021to 59,737 units compared to 1,00,343 units year ago. Another factor that may likely cause the prices to go north is the increase in the prices of raw materials like cement and steel.
What are consumers looking for?
With the pandemic enforced work-from-home and online education demands, consumers are looking for bigger homes in projects that also offer open spaces and amenities to unwind. They are willing to pay premium for projects by grade A developer as they can be assured of timely possession and quality of construction. Developers on the other hand are also providing additional benefits to consumers to complement the lower rate of interest charged by banks. Recently, a leading developer extended the Maharashtra government’s lower stamp duty benefit that was applicable till 31st March 2021 for a limited period and announced that they will bear the differential amount. This will enable homebuyers who may have missed out on it earlier to purchase their dream home.
The real estate sector has been one of the top contributors to the economy and the impetus provided by the government to help boost sales bear testimony to this fact. Post the market consolidation following the NBFC crisis, the sector is now shaped by reputed developers who have deep understanding of growing in a planned and disciplined manner and this will ensure that the coming decade is arobust one for the sector.