Realty set to look up after years of hiatus; try & catch them young

It would not be wrong to say the real estate industry is at an inflection point and could potentially see explosive growth. Among all the segments, housing is showing tremendous demand. There is a gradual rise in property prices as well.

At home, the reverse migration caused by the rise of the remote working culture due to Covid-19 pandemic, led to the emergence of heightened demand for homes in tier-II and tier-III cities, including rentals. In fact, a strong policy support though last-mile funding mechanisms provided by the government for delayed housing projects, reduction in stamp duty and property registration fee in a few states, along with incentives and attractive payment schemes offered by developers, have drawn the interest of consumers. A fall in interest rates has been an additional sweetener. Now developers are witnessing a surge in enquiries across key real estate markets, leading to improved sales outlook with many favourable factors converting those enquiries into purchase decisions.

During the third and fourth quarter of FY21 (October 2020-March 2021), residential housing property registrations and sales across major cities exceeded their pre-pandemic average levels. Launch of new units has progressively gone up in the last four quarters to over 6 lakhs in Q4 of FY21. Even real estate giants are buying land for their projects. Even investors like Radhakishan Damani, owner of , is on a property buying spree.

In another development, there was high attrition in the IT sector among all industries in India at 8.03% in the April-June 2021 period, followed by educational services at 7.45% and knowledge process outsourcing at 7.38%. Many companies are planning to dole out an average of 10-15% salary hikes across verticals to retain their staff.

This means there will most probably be handsome pay hikes this year. Thus, going forward, we will continue to see the demand for housing rise not only due to pent-up demand but also due to a structural transformation in the demand situation. Besides, a combination of first-time homebuyers and customers moving up the property ladder to shift to larger homes or acquiring second homes in another location will further boost demand. Key markets such as Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, the Mumbai Metropolitan Region (MMR), the National Capital Region and Pune are seeing good demand in the housing segment.

With Sebi approval to the Real Estate Investment Trust (REIT) platform, it is expected that it would create an opportunity worth Rs 1.25 lakh crore ($19.65 billion) in the Indian market in the coming years. The government has taken various measures in the Budget in last seven years to spur growth in the real estate sector. The government’s Smart City Project, with aims to build 100 smart cities, is a prime opportunity for real estate companies. The residential sector is expected to grow significantly, with the central government aiming to build 20 million affordable houses in urban areas across the country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union Ministry of Housing and Urban Affairs.

Thus, the expected growth in the number of housing units in urban areas will increase the demand for commercial and retail office space as well. The real estate sector in India is projected to reach a market size of $1 trillion by 2030 from $120 billion in 2017, and contribute 13% to the country’s GDP by 2025. Besides, the growing FDI flow to Indian real estate and the RERA regime are encouraging increased transparency. With the expected recovery of the real estate market, the housing finance market is also seeing good growth trends, presenting an opportunity for stock investors.