A bullish rise

Real estate sector, which is considered as the second-largest employment generator after agriculture, contributes around six per cent to the countrys gross domestic product (GDP).

Despite the ongoing pandemic, lower interest rates, reasonable property prices, and reduction in stamp duty have generated hope among developers. The real estate sector is hoping that the government will extend some more incentives in the upcoming budget session.

According to some experts, the residential segment has experience green shoots of recovery and is expected to gain further momentum in 2022. Commenting on the sectors performance, PNC Menon, Chairman at Sobha Realty, said: It is interesting to note that the overall impact of the pandemic on real estate in India has been quite paradoxical. Contrary to what was thought of at the beginning of Covid-19, it has in reality infused the need for personal space and housing in the homebuyers minds. This was evident in the quarters that went by in 2021. Now, with the improving business environment, increased understanding about the virus and larger number of people having been brought under vaccination drive, I can say that it has helped the residential segment to come around with confidence and optimism. Now that the resilience of the real estate players has been adequately tested during the pandemic in 2020-2021, the sector is watching the year 2022 and hoping for stronger economic revival and growth. With annual budget in the offing, the sector expects government to take measures to rationalise taxes that will stimulate demand and improve investor climate in the housing sector.

A significant percentage of real estate developers expect property prices to rise of up to 30 per cent this year due to sharp increase in rates of building materials, according to a survey conducted by realtors body Confederation of Real Estate Developers Associations of India (CREDAI). Around 60 per cent developers foresee a price rise up to 20 per cent in 2022, due to increase in prices of building material, the report said. As per the survey findings, nearly 35 per cent of respondents expect prices to rise by 10-20 per cent, while 25 per cent of builders see up to 10 per cent hike in rates. Another 21 per cent respondents expect property prices to rise in the range of 20 per cent to 30 per cent.

This sentiment was echoed by S.Krishnakumar, ex-chairman at Confederation of Real Estate Developers' Associations of India (CREDAI), Kerala and CMD at Nikunjyam Builders. The price of essential materials has risen. If you make an investment in a property now, you will see an appreciation of a minimum of 10 per cent in the future.

According to Housing.com report, Bengaluru and Hyderabad are expected to lead Indias residential real estate recovery in 2022 at a time when home purchases have picked up pace in the wake of record low home loan interest rates in the last 15 years and record low affordability driven by stable real estate prices. While these cities have seen increased homebuyer activity after the second wave of the pandemic, Tier-II cities like Surat, Jaipur and Patna are the ones that have recorded the highest increase in online property search volume in 2021. The index also lists its cities to watch out for building-up residential demand, which include Tier-II cities like Surat, Jaipur, Patna, Mohali, Lucknow and Coimbatore.

The pandemic has convinced working professionals to opt for the work-from-home concept and many are moving back to their native homes in Tier-II cities. The benefits of living in a Tier-II city are numerous as they offer a low cost of living, better work-life balance, and affordable housing. This has inspired Indian real estate developers and state governments to focus on these high-potential markets.

The same is the case in South India. Krishnakumar adds: Post-pandemic, Kerala has been showing strong signals for real estate. With many global IT companies announcements to set up offices in Trivandrum and Kochi, Adani Group taking over the management charge of Thiruvanathapuram Airport, Adani Vizhinjam transpiment port nearing completion, the Lulu mall opening, Taurus mall and office space nearing completion are all bright spots offering jobs and business opportunities for the state. Even in the cities of Bengaluru and Hyderabad, there has been an 80 per cent YoY rise in the commercial and residential sectors. With respect to Kerala again, the residential sector has picked up momentum in the last three to four months, and has been witnessing excellent booking locally and from the NRIs in the Middle East. Compared to the beginning of 2021, the latter half of the year and now as we move into 2022, the ready -to-move apartment market remains extremely bullish.

According to Sobha Realtys Menon, the IT sector dominated markets seem to have done well. Sales in Bengaluru and Hyderabad rose the most during H2 2021 at 104 per cent and 135 per cent YoY respectively. Mumbai and Pune have done well too, accounting for 41 per cent sales during H2 2021, spurred initially due to the state government of Maharashtra having reduced the stamp duty. Then there is the angle of affordability, which has improved over the years across all markets, with income growing and housing prices correcting. Due to low home loan interest rate, affordability index has further improved. Ahmedabad, Kolkata, Hyderabad, Chennai, Pune, Bengaluru, NCR and Mumbai have witnessed improvement in affordability index and are doing well. Some of the leading cities that are most preferred by the NRIs to invest include Bangalore, Ahmedabad, Hyderabad, Pune, Chennai, and Goa to name a few.

What makes these destinations favourable among the customers is the availability of great infrastructure, favourable living conditions, potential to yield great RoI, and industrial development. Additionally, the start-up and entrepreneur ecosystem attracts talent from around the globe, making these cities the most sought after to set up large-scale businesses, in turn paving the way for all round development such as education and financial institutions, healthcare and hospitality services, transport, and logistics among others where one will find real estate development at the centre of it," Krishnakumar added.

Benefits for NRIs

Real estate is the second-largest employer in the country and is also expected to incur more non-resident Indian (NRI) investment, both in the short term and the long term.

The sector stood strong in the most turbulent times and gave strength to the countrys economic revival. Emerging as the most trusted, secured, stable and rewarding investment choice for investors, it is now essaying a defining role in taking India ahead and positioning it as a leader globally.

The dearth of disposable income has been a deterrent factor for salaried class towards taking home loan and buying real estate. Since the input cost in real estate has increased the rates, the salaried class is left with no other option but to approach for home loans from financial institutions. Interestingly, the tenure of repayment of home loan has now been fluctuating between 11-30 years.

Buyers are looking forward to an increase in this limit in Union Budget since this limit has not increased in the last many years. Some of the recommendations include home loan interest deduction, enhanced affordability housing limits, offering tax exemption to investments in REITs starting with Rs 50,000, besides many others.