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2021: Experts Expect Faster Recovery Of Real Estate In Q1, Adoption Of Technology Across Industries

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While the pandemic came with its challenges, it also brought upon opportunities by the adoption of technology across industries. 

There have been a lot of uncertainties around the pandemic and it did hurt the Indian economy, triggering a weak outlook for the GDP, along with a liquidity crunch in.

But for 2021, there seems a hope in the RBI’s latest predictions that the economy has stopped shrinking since October 2020 and there is hope for growth in Q3 and Q4.

The most important factor contributing to the increase in sales is the increase in affordability.

While the pandemic came with its challenges, it also brought upon opportunities by the adoption of technology across industries.

Ramesh Nair, CEO & Country Head, JLL India said:

1. Overall Real Estate Expectations.

“The faster than expected recovery in Q2 FY 21 GDP reflects the resilience and robustness of the Indian economy. RBI’s decision to hold the policy rate and accommodative stance to revive growth on sustainable basis augurs well for the economy. The decision to maintain the policy rate was in line with the real estate sector expectations as the sector is just recovering and yet to bounce back to pre-Covid levels.”

2. Residential

“Some initial signs of revival were witnessed in the market with sales increasing by 34% in Q3 2020 when compared to Q2 2020. This recovery is expected to continue in the next few quarters fuelled by affordability (attractive pricing, lower interest rates), reinforced desire to own a house and renewed interest from certain buyer segments such as NRIs.”

3. Office

 “Green shoots of recovery were witnessed in the third quarter of 2020 with leasing activity gaining momentum. The pace is only expected to increase in the upcoming quarters. The year 2021 is expected to witness 40-42 mn sq ft of new completions, while net absorption is likely to hover at 30-32 mn sq ft.

This is almost at par with the annual average levels of net absorption seen during 2016-2018 at 32-33 mn sq ft. However, flexibility will be the key to speeding up the recovery process. Landlords will have to be more receptive to the demands of tenants and offer flexible options, in terms of space as well as value. Strong market fundamentals, sustained IT sector growth and the increasing presence of institutional investors will continue to drive the office market in the times to come.

Mr. Vishal Mirchandani, CEO, Commercial & Retail, Puravankara Limited saidWith the news of the vaccine rolling out, it can be believed that the organisations will slowly resume working from the office. Several occupiers have anticipated 20 to 25% of their workforce to continue working from home, the reduced workforce will be counterbalanced by added space requirements due to social distancing norms. The flexibility of the developer is important to enable these functional changes. The IT and ITES space is accelerating recovery and the stock absorption should rebound in the early months of 2021.

Warehousing is another segment that will yield opportunities for commercial players. In the present scenario, the booming e-commerce and retail industry has fuelled the need for warehousing units. Also, the growth of manufacturing in India under various Government policies will further enable this demand.  Technology has played an important role in aiding business continuity all through the lockdown, therefore most organisations will have to adopt a hybrid model for survival. We at Puravankara, are poised on the growth of this category and have planned to invest Rs. 1,500 crore in the business over the next five years. These will be driven through joint ventures (JV) and strategic partnerships and will concentrate on Bengaluru, followed by Mumbai, Hyderabad, Chennai and Pune.

Moreover, the penetration of technology through the pandemic has put an impetus on Data-Centres. These have become an asset class on their own. In a couple of years, data centres will form at least 10% of our commercial portfolio.

 Mr. Ashish Puravankara, Managing Director, Puravankara Limited said “The world has braved several crises in the past. However, even the Global Meltdown in 2008 did not have an impact as drastic as the outbreak of COVID-19. 2020 shall always be remembered as a year that was unparalleled to anything seen before. While the pandemic came with its challenges, it also brought upon opportunities by catalysing the adoption of technology across industries. Right from large organisations and companies to the neighbourhood stores, the adoption of technology became paramount for business continuity and to stay connected with the consumers. The focus shifted from strategic growth plans to sustenance and survivability.

The real estate sector too revamped several functions that have now gone online. Even though the sector has been implementing technology in its Construction practices and for project management, disruptive innovation was seen most in creating “touchless experiences” for customers and adding the element of convenience to their lives. 

 In the coming quarters, the rollout of the vaccine will aid the recovery of the economy and further improve the consumer sentiment. The country will witness several new launches that will be designed for the modern-day working professionals. The housing sector will transform manifold; not only in terms of design and layout but also in perception.

The pandemic has accentuated the importance of owning a home as safety and security has become an intangible aspect. It has transformed from being an investment or an asset to a basic requirement. Further, the year will yield several lucrative investment opportunities as the impetus will be on connectivity and smart infrastructure.”

Mr Rohit Gera, Managing Director, Gera Developments said, “2020 dealt yet another blow to the struggling real estate sector.  However, the indomitable human spirit was also visible through the lock down and pandemic.  As we come to the end of what has been a year that we never expected to see in our lifetimes, there are clear signs of demand coming back to the real estate sector.  Whether this is a sustainable bounce back or pent up demand will be revealed in the months to come, however, there are a number of dynamics at play in the current environment.

The most important factor contributing to the increase in sales is the increase in affordability.  Affordability has been impacted positively based on prices coming down over the last 5 years and home buyers getting salary increments over the same period.

Compounding the increase in affordability is the reduction in mortgage rates.  The last time the numbers looked this good was in 2004 after which the real estate sector saw an unprecedented boom for the next few years and prices rose substantially.

The government of Maharashtra, as well as some other state governments, have offered lower stamp duty for flat purchases made before 31st December.  The Maharashtra government has infact taken an extremely smart step by offering a greater stamp duty discount up to December and then a lesser slab between January and March. This too is acting as an incentive for homebuyers to come in and purchase their homes.

Because of the challenges faced by the industry over the last few years exacerbated by the Covid crisis, the number of new projects has gone down substantially and as a result inventory for sale has come down substantially.  Developers are exercising caution and the result for the customer is that from a situation of abundant choices, home buyers today have far less to choose from. This also contributes to people accelerating their decision to purchase their homes.

While these are all positives as far as the sector is concerned, the structural problems of high leverage, outstanding debt and stagnant projects has still not been addressed.  Developer margins have been eroded on account of additional interest burden and overheads payable through the lockdown and Covid period.

All in all while this is a great time to buy a home, it is important that homebuyers do their due diligence and make sure that they buy from reputed developers where there is virtually no risk to their investment.”

ALSO READ: Evolving Occupiers’ Preferences Will Alter Offerings Of Coworking Spaces

 

 

 

 

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