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Mumbai to see spike in home sales

Published on Tuesday, March 30, 2021 by Chittorgarh.com Team | Modified on Thursday, July 22, 2021

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March 2021 property daily registrations in Mumbai recorded nearly 4.3 times higher than the daily rate of registration recorded March 2020, as reported by Knight Frank India

Following stagnant sales for nearly seven years, the housing sector has shown signs of revival since Diwali 2020. During the October - December 2020 quarter, several reputed developers, such as Godrej Properties, clocked significant sales while Macrotech Developers Pvt. Ltd. (formerly known as Lodha Group) reported over INR2,500 crores of bookings in the three months. Continuing the trend in the market, Anarock data projects that Mumbai region and Pune cumulatively accounted for 53% of housing sales in the Jan-Mar 2021 quarter with a significant increase by 46% annually in Mumbai region.

Reputed developers driving the growth story

Reputed developers driving the growth story

The shift among homebuyers towards reputed developers with proven capabilities is quite apparent. Most notable of these capabilities are timely delivery and quality of construction. Inability of Tier II developers to sell during construction phase led to loss of consumer confidence and eventually led to shift towards Tier I developers. Inability of Tier II developers to sell during under construction as well as no capital available for them from the lending institutions has accelerated the consolidation of the industry. Under this backdrop the financial institutions that supported them earlier are also looking to be rescued by the Tier-1 players now.

 

Consolidation wave due to policy reforms and liquidity crisis

 

Talking of scale, there are only two developers in India that have delivered over 500 Lakh sq. ft, one being Macrotech Developers Pvt. Ltd - known for its diversified portfolio that caters across consumer segments with strong footprint of 570 Lakh sq. ft. delivered. Clocking business of over 50,000 Cr in the last seven years, Lodha Group holds a strong track record of quality developments and timely delivery in Mumbai region. As reported by Knight Frank India, Mumbai recorded a remarkable surge in property registrations driven by home sales in March 2021. With the re-instatement of home-ownership amongst consumers and consumer sentiment uplift towards the sector, the home-buying trend continues despite the 1 percentage point or 100 bps increase in stamp duty rates effective from 1st January 2021.

A housing-led revival has several other positive implications for the GDP. The construction industry employs nearly 5 crore people and is considered the second largest employer in the country. In addition, the industry creates several jobs in the allied sectors. It is expected that the construction industry will employ nearly 7.6 crore people by 2022 and is likely to become the largest industry in India going by the employment generated. Given the fact that nearly 25% of the value of a house sold goes to government, the industry also helps tremendously towards the cause of nation building.

Housing, prime focus for government

When it comes to home ownership, one of the biggest challenges is affordability not just in the isolated sense of price of the unit but also the prevailing interest rates on home loans since a majority of home purchases are financed via banks and NBFCs. It is interesting to note that home loan interest rates were in excess of 10% nearly a decade back. This contrasts with current home loan interest rates of just 6.75% - marking a new all-time low. This has been possible due to an all-time-low repo rate of 4% and has offered additional tailwinds to home buyers through reduced EMI.

Thankfully, the sector is one of the focus areas for the central government. Specifically, the residential sector is expected to grow significantly, with central government aiming to build several affordable housing projects in urban areas across the country under the Pradhan Mantri Awas Yojana (PMAY) scheme. Independent research forecasts that the real estate sector in India is expected to reach USD 1 trillion by 2030 in value. By 2025, the sector is expected to contribute 13% to the country's GDP. Emergence of nuclear families, rapid urbanisation and rising household income are likely to remain the key drivers for growth in all spheres of real estate, including residential, commercial, and retail.

Real estate in India is thus expected to post strong growth in the coming years. While the advantages to home buyers are quite evident, it is likely to create several opportunities for investors as well. Stay tuned for more.

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