Vaccine availability a property booster Filed on January 28, 2021
Weakening of rupee especially in first-half of this fiscal coupled with falling interest rate across the globe made India an attractive investment destination. — Reuters

Pandemic drives NRI homebuyers to invest in safe haven assets back home.

Indian real-estate sector had predominantly been keenly watched by Non-resident Indians (NRIs) as a long-term investment for safe-haven assets.

The onset of novel coronavirus disease (Covid-19) accelerated property buying in India with favourable and timely government policies, as people across the globe travelled back to their homeland.

Srini Gopalan, chairman, Unitern Advisors, said: “Weakening of rupee especially in first-half of this fiscal coupled with falling interest rate across the globe made India an attractive investment destination. Both these factors incentivised a lot of NRIs to send remittances back home vis-a-vis keeping it in banks in foreign countries. Most of NRIs believe that investments in the real estate sector is the safest bet when the prices are at an all-time low and most projects are nearing completion or are ready to move.”

The 27th Edition of Knight Frank-Ficci-Naredco Real Estate Sentiment Index Q4 2020 (October – December 2020) survey indicates that the ‘current sentiment score’ entered the optimistic zone at 54 points for the first time in the Q4, a significant jump of 14 points over the previous quarter. The ‘future sentiment score’ also reported a robust surge to 65 points in Q4 from 52 points in Q3.

Western India, including Maharashtra and Gujarat, saw the sharpest jump in future sentiment index. This zone’s future sentiment jumped to 66 points in Q4 from 47 points in Q3. With respect to stakeholders, both developers and non-developers (which include banks, nonbank financial companies, or NBFCs, and private equity, or PE, funds) recorded an improvement in future sentiment score in Q4. On the macroeconomic front, 82 per cent of the survey respondents opined that the economy would grow further in the coming six months, as opposed to the 57 per cent respondents, who held the same view in Q3 2020.

Similarly, seven per cent of the survey respondents said that economic health would worsen in the next six months Q4 from 31 per cent in Q3.

In terms of credit availability, 87 per cent of the Q4 survey respondents believed that the funding scenario would either improve or maintain status quo over the next six months.

Further, 77 per cent of the Q4 survey respondents were of the opinion that residential sales would increase over the next six months, up from 66 per cent in Q3. With regards to commercial spaces, 60 per cent of the Q4 survey respondents, up from 47 per cent in Q3, said that office leasing activity would increase over the next six months.

Shishir Baijal, chairman and managing director (CMD), Knight Frank India, said: “Both the current and future sentiment scores in Q4 have seen great surge in the latest survey backed by revival in both residential and office market real estate that have been highly encouraging. The sector saw a lift in the market’s mood and increased stakeholder expectations of a stronger recovery in the next six months. As we begin our journey into this year with a positive outlook, it’s important to closely watch the performance of the key economic indicators in the coming months to check the sustainability of the growth seen in the last two quarters of last year. Equally crucial is the development of the vaccine and its widespread availability for the masses, these two factors will largely determine the performance of the real estate sector in the coming months.”

Residential segment outlook was supported by pent-up and festive demand, multi-decadal low home loan interest rates, attractive residential prices and state government incentives such as reducing the stamp duty in Maharashtra. Residential sales reached pre-Covid-19 levels (2019 quarterly average) by Q4.

In Q4, a substantial 76 per cent of the survey respondents were of the opinion that residential launches would increase in the next six months. Further, 13 per cent respondents felt that new project launches would remain the same in the coming six months, while 11 per cent thought that they would decrease. Investments in the real estate sector over the recent past reflect positive sentiments on the part of investors, both domestic and global, on the resurgence in the Indian economic growth story.

Dr S Vasudevan, CMD, Ozone Group, said: “The realty industry is one of the bellwethers of India’s economy and contributes more than eight per cent to the country’s economy employing more than 30 million people. It’s an important industry as it has a ripple effect on other ancillary sectors. Any measures taken to uplift the sector will have the potential to revive the overall economy.

Over the past couple of years, the industry has been working towards fulfilling our PM’s vision of ‘Housing for all by 2022’. The government has also taken proactive measures that are commendable, but given the present market conditions, the industry needs more focused measures to further bolster demand in 2021.”

Vasudevan believes that there is a need for a regulatory authority especially for the cement and steel sectors to regulate the price and thereby curb the rise in construction cost and instances of cartelisation. The government should adopt a uniform policy across all states in the reduction in stamp duty for various instruments related to real estate transactions, for the next 18-24 months. This would definitely give fillip to the homebuyers.

Reduction in premiums for transfer of development rights (TDR), floor area ratio (FAR) etc is likely to enable more cost effective and cheaper products for end users. And reduction in GST across all sectors of real estate will help bring down the overall property cost and push demand. —


Sandhya D'Mello

Journalist. Period. My interests are Economics, Finance and Information Technology. Prior to joining Khaleej Times, I have worked with some leading publications in India, including the Economic Times.

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