Page 59 - Kolte Patil AR 2019-20

Emerging trends during COVID-19

The novel coronavirus originated in assets provide the highest security in have reduced them substantially due to
China and was declared as a global times of crisis, economic uncertainty as a result of the
pandemic on 11 March, 2020 by the y yFurther driven by all-time low rates of lockdown
World Health Organization (WHO), interest on home loans y yMajority of the buyers now favour
which was closely followed by a global y yBengaluru, Hyderabad and MMR risk-free investments. The demand for
lockdown. The lockdown had a massive witnessed the highest number of developers having the least execution
impact on the world economy as well as bookings just before and during the risk is at an all-time high, even if the
various sectors across the globe, include lockdown as a result of the developers properties are higher priced.
real estate. However, it has also opened placing extra emphasis on digital sales y yBuyers looking for properties from
up some opportunities for the real estate an investment perspective prefer
sector. According to the ANAROCK y yDemand for the affordable ready-to-move-in (RTM) homes over
Consumer Sentiment Survey, the housing segment has not decreased under-construction ones due to the
following trends were noticed: despite concerns over its target
audience’s limited income and rising uncertainty regarding the resumption of
y yHome ownership has become a unemployment rate. In fact, buyers, construction activities across the nation
priority for the millennials after the who previously had higher budgets, (Source: Financial Express)
outbreak of COVID-19 since physical

Improving affordability
Since 2013, real estate prices have is also very favorable from buyers’ affordability parameters indicate that
underperformed the broader per-capita standpoint. The government is focusing once COVID-related issues recede,
income growth as well as consumer on affordable and mid-income housing housing market volumes could expand
price index. Interest rates on mortgages through an interest subvention scheme over several years based on latent
have also declined significantly to the and tax breaks for developers of low demand in a supply-deficient market.
lowest levels in several decades, which ticket sized housing. These improved

Industry consolidation is the underlying theme
The Indian real estate industry is highly 20% of the directly addressable market equity and debt funding. However, the
fragmented – however, following the in Top cities. Structural improvements emerging trend of working from home
cyclical downturn, government actions already in place should allow large and weak employment generation in
and legislative reforms, there is ample developers to launch operations in more a weak economy reduces the growth
scope for consolidation to the benefit of cities, as well as gain market share potential across the near to medium
strong developers capable of executing in existing markets. (Source: Jefferies term. Lease rentals are expected to
projects in a timely manner. Smaller Equity Research Report) decline in this time frame.
players, with weak market position and Capital availability is a key NRI influx: There has been strong
leveraged balance sheets, are already differentiator: Weak demand, multiple traction from NRI customers in the
finding it difficult to sustain. Overall, disruptions and shrinking NBFC last few months. Advanced digital
the residential real estate market may funding have shrunk the capital pie tools like 360 degree project walk
move in the same direction as the for developers, extending the relative through have heightened the customer
commercial property development market potential for leading execution- experience and allows meaningful time
market that sees a much higher market focused players. Further, customers’ to research properties online. Recently,
share for leading real estate brands preference continues to gravitate to the number of expats leveraging the
coinciding with a much higher level of completed apartments, which increases rupee depreciation versus dollar has
customer confidence.
the deployment of capital per unit of increased. Most surveys indicate that
Currently, within the framework of inventory and pushes back cash inflows real estate is still considered a top
the housing market in India, weak from the sale transaction. Availability of investment asset by Indians abroad.
property prices, low apartment values capital at reasonable costs is therefore a Further, given the mass job cuts in the
and limited scale of market demand in key differentiator. US and Europe, their unemployment
smaller cities means that top developers Weakness in lease rentals : The lease numbers have increased substantially;
confine their operations to a few top rental market in commercial real estate and this will lead to reverse migration
cities, which represent about 40% had previously trended higher based on to India. Going forward, NRI segment
of the overall market. The organised supply being confined to few developers is expected to contribute increasingly
developers currently control <10% of and supported by availability of private towards sales.
overall market opportunity and ~15-

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