Key trends in the housing sector

Real estate is one of India’s most powerful economic foundations. Rapid urbanization, changing consumer behaviour, regulatory reforms and the impact of COVID-19 are all currently fueling the evolution of this pillar. After being hammered by the pandemic, the real estate sector has started to recover.

The year 2021 marked a turning point in the residential real estate sector in India. Strong momentum in the domestic market is expected to continue into 2022, with sales likely to reach pre-COVID levels.

Even as the global economy collapsed, the epidemic led to strange behavior in housing markets, with prices skyrocketing and low in defaults. We can see the buying frenzy subsiding as markets are at record highs. Home sales have increased as a result of COVID. This year, trends are likely to return to pre-2020 levels. COVID forced consumers to stay at home, often with free time, and sparked a DIY renovation craze. Nevertheless, it is believed that the future of home improvement will be dominated by professional services. The increase in the real estate value and the available surplus value for financing projects is an explanation for the shift. Another factor driving the upward trend is the fact that sales of existing homes will exceed sales of new homes, which normally do not require any work.

The market is driven by the implementation of initiatives that generate demand and encourage people to buy real estate. The greatest demand among buyers in the housing category was for ready-to-move-in apartments. In times like these, however, it’s critical to better educate customers and manage expectations.

The witness trends are revolutionary. The real estate sector in India is undergoing a technological transformation. Various advanced strategies and solutions are being implemented across the industry. As a result of these new developments, the growth trajectory of the market has increased. One of the best-known developments in home automation is a fantastic mix of technology and real estate. These types of locations have tremendous potential to attract a wide range of investment opportunities as well as forward-looking buyers, especially millennials.

In addition, trends that emerged during the challenging COVID-19 era will continue into 2022. As a result of this transition, many new housing trends have emerged. The housing sector accounts for a large part of the real estate sector (about 80%) and has recovered quickly from the Covid-19 crisis. It has already started to return to pre-COVID levels.

Today, no developer wants to take out a loan to buy land. As a result, developers are opting for asset-light models such as JDAs. DM was once popular, but developers quickly understood its shortcomings and JDA now serves as a suitable model for people to follow. People also prefer revenue sharing over area sharing because of the GST restrictions.

Maximizing FSI has been the game in the past when it came to taking ambitious approvals. Today’s developers have realized that completing projects on time or early is more important than maximizing FSI. Developers can easily understand the concept of net present value (NPV).

Large-scale technology integration

RERA prohibits the sale of projects on paper, so approvals are given on the first day. Important approvals must be obtained prior to the start of a project. Before banks can fund the project, more equity from the promoter is needed. As a result, only reputable developers with large funds are allowed to participate in real estate development.

Customers are truly kings now that RERA has been introduced. Strict restrictions apply to protect the interests of customers. These include standard appointments, cancellation procedures and delay handling. Unilateral contracts with customers are no longer possible. Every developer now understands that selling is the real salvation. Prices are no longer disproportionate to interest rates, which is why now is a better time to sell than later.

Instead of focusing on financial engineering, actual engineering is prioritized. Today’s developers understand that real engineering is more important than financial engineering when it comes to completing projects. Previously, when there was a lot of money, developers chose the latter instead of the former, leaving a large backlog of unfinished projects.

Developers have understood that their margins depend on entering a land purchase at the right price and receiving evictions on time, which is why they have outsourced crore business. As a result, developers outsource their projects and day-to-day operations, including cash flow management, while promoters focus on business development and approvals. They can manage their business more efficiently by attracting talent at a reasonable cost.

Home that is ready to move in is gaining popularity

Homes under construction are gradually losing their appeal due to longer wait times and escalating project failures. As a result, ready-to-move-in houses are becoming increasingly popular. Many builders have embraced the business strategy of building first and then selling to align with this stance. This popular housing concept in Europe and America is starting to enter the Indian real estate market.

Investment choices that are attractive

With the need for Real Estate Investment Trusts (REITs) to have 80 percent of their underlying assets operational and income-generating, such properties have become a stronger investment alternative than traditional opportunities. It is a low-risk technique of diversifying one’s investment portfolio. Despite the fact that the pandemic has put pressure on rental cash flows, a strong and rising long-term picture is expected.

The changing dynamics of the real estate market has led to a gradual growth of non-resident Indian investments (NRIs) in recent years. Moreover, since the establishment of the FDI (Foreign Direct Investment) road, India has been the preferred location for NRAs to pool their funds. The sector will undergo a paradigm shift in the coming years as the influence of non-resident Indians grows.

Increasing Technology Adaptation and the Proptech Revolution

Despite the fact that many Indian companies have been hesitant to adopt technology, real estate has always been at the forefront when it comes to using its power. In addition, millennial home buyers have been impacted by their continued exposure to new technologies. As a result, homes with a high degree of automation and Internet of Things (IoT) technology are becoming increasingly popular.

The rapid adoption of Proptech solutions across all areas of real estate – from construction to sales to customer engagement and asset management – ​​was one of the most notable elements of 2021, and this trend is expected to continue into the future. Before the viral epidemic shook the global business ecosystem, the proptech market had progressed beyond enabling online real estate searches to provide consumers with end-to-end solutions.

Property Ownership and Larger Homes Are Increasingly Popular

Real estate ownership is becoming more and more popular. While this helped build consumer confidence in residential real estate, it was government and banking support that got things going. Supply and demand statistics improved as a result of the convergence of these two elements.

Many homeowners have realized the utility of larger homes after spending a significant amount of time indoors. As a result, the demand for slightly larger homes with multifunctional spaces such as work and activity space and extra breathing space has increased enormously.

Distance is no longer a concern

Most companies will maintain their remote working culture while also experimenting with some form of WFH culture for their employees. This eliminates the need to buy a home close to your office, giving potential home buyers more options as they can now judge based on factors other than “distance to work.” People will migrate to locations in cheap places as the walk-to-work culture loses its allure.

There is no denying that the real estate industry is going through huge changes, with so many new, positive developments.

(By Srinivasan Gopalan, Chairman, Unitern Advisors Pvt Ltd)

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