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The times are changing in the midst of a global redefinition of how we — and everything else — function. Covid-19 has altered the basic dynamics of our social and cultural structures. Businesses have been forced to revisit centuries-old models and find ways to survive and grow in the new normal. Like all change, this process has been difficult and painful, but results are becoming evident.

Indian real estate was already grappling with moderated demand due to economic challenges and increased regulatory compliances. When the coronavirus hit and lockdowns ensued, construction activities froze, workers migrated to their home states and sales almost crawled to a stop.

After a four-month hiatus, homebuyers returned to the market. Post-lockdown demand has been decidedly bullish and continues to grow — although here too, there are notable changes.

Real estate’s perception as the safest asset classes was reinforced. As financial markets were battered and wealth eroded massively, this highly secure, tangible asset once again took centre stage.

What has changed

All developers experienced unprecedented cash flows, and most fly-by-night players finally succumbed. Today’s homebuyers have placed their trust almost exclusively with bigger, established brands and the market share of Grade A developers has increased significantly since January 2020. NRI buyers contributed heavily to this exodus.

In commercial real estate (CRE), India recently saw its second real estate investment trust (REIT) winding up oversubscribed, further reinforcing NRIs’ ongoing faith in India’s strong CRE story. However, NRIs are currently more focused on housing.

The lockdown and work from home culture have led to a scramble for home size upgrades – size matters more than ever before. Buyers who previously looked for 2 BHK sizes shifted their crosshairs to 2.5 or 3 BHK formats to accommodate the WFH and e-learning culture.

Millennials have emerged as the dark horse behind this demand resurgence. Anarock’s recent consumer sentiment survey during the Covid-19 lockdown affirms that a significant share of current homebuyers are millennials in the age group 25-35. Sixty-eight per cent of these buyers were purchasing for their end use.

Apart from post-lockdown sentiment, there are other strong fundamentals driving housing demand. Developers have unleashed extremely lucrative deals on properties whose prices are now rock bottom. Interest rates are at a two-decade low, and ready-to-move properties by reputed developers — which are in highest demand — are plentiful. NRIs are also zeroing in on under-construction homes due to be completed within 6-12 months, with the deciding factor in this category once again being the developer’s size and reputation.

NRI compulsions

The uncertainty in global markets has made NRIs determined to secure their investment portfolios in India. They are driven either by the need for a home to live in or a steady rental income stream.

The increasing adoption of digital mediums in real estate — a direct byproduct of the coronavirus pandemic — gives NRIs who earlier had to travel to India to look at projects a decisive advantage. They are now relying on virtual walk-throughs by developers and real estate consultants and clinching deals via digital CRM modules.

Developers have also rolled out schemes that give today’s buyers tremendous flexibility on payment and special NRI-exclusive payment plans and discounts. With the Indian rupee still struggling to gain against the dollar, this is one of the best times for NRI investors to use this advantage.

Market scenario

As per Anarock research, the number of new launches for H1 2020 has come down by 56 per cent from H2 2019 with only 42,610 units being launched in the first half of the year. Sales continued to exceed new launches and stood at 57,490 units for the first half of 2020.

There has been a marginal reduction in unsold inventory because of muted new supply and sales exceeding new launches.

Among the top seven cities in India, Mumbai continues to be the most attractive for real estate as it had the maximum new launches (10,490 units) as well as sales (17,530 units). Bengaluru, which has traditionally seen significant demand from NRIs saw 9190 units being launched and 11,620 units being sold in the first half of 2020.

Pune, another destination which attracts NRI investments, saw 8540 units being launched and 9360 units being sold in the first half of 2020.

National Capital Region (NCR) saw a reduction of 6 per cent from H1 2019 in unsold inventory on the back of 10,250 units being sold in H1 2020. Mumbai, Pune, Bengaluru and NCR have generated the maximum NRI enquiries for Indian housing.

Prices for Grade A properties across markets have been stable in the past six months. Since prices did not reduce during the height of the lockdown, they will not do so now – in fact, with resurging demand, there is ample scope for future price hardening.