What does this festive season have in store for India’s homebuyers?

Homebuying in India remains driven by sentiment. A major difference between the current crop of buyers and those a decade ago, is that today they are much better informed about the housing market, thanks to RERA. Despite their due diligence on the housing project, the developer and all other related aspects, the actual purchase decision continues to hinge on auspicious festive periods.

The festive season, considered very auspicious for most Indian households, has always been closely linked with homebuying. This is when developers traditionally line up a host of project launches and pull out all stops on their marketing budgets. Each year, as the monsoon drifts off the Indian mainland, lucrative offers and schemes rain down on homebuyers.

Walking down memory lane

As we look back on the decade gone by, we see the festive period showing interesting market insights. ?

The years 2010 to 2013 were the golden years of India’s housing market, when launches averaged over 240,000 units per year and annual sales at over 180,000 units for the top seven cities. Coming down to the last 3-4 years, we see the sector enter a turbulent phase, with a drop of 33% in sales and nearly 50% in launches. However, we will do well to remember that 2017 and 2020 were historic years that bore the impact of demonetization, market reforms and the COVID-19 pandemic.?

When we look at new launches on a q-o-q basis from Q3 to Q4 of a typical year, which coincides with India’s festive season, the results are revealing. For instance, average quarterly launches in Q4 for the years 2010 to 2012, were higher by 43% q-o-q. On a q-o-q comparison of average sales numbers too, Q4 sales were up by 9% from 2010 till 2015. For the disruptive years from 2016 to 2020, quarterly sales for Q4 were down because of the impact of demonetization, RERA and GST reforms, the NBFC crisis in 2018, and finally the pandemic last year. The good news is that with substantial withdrawal of COVID lockdowns and pent-up demand, healthy sales growth with a jump of over 50% q-o-q was seen in Q4 2020.

Pertinent changes ahead

1.????We are in the middle of an extended period of historically low interest rates. In fact, home loan rates are trending at their lowest in 15 years, changing the macro-economic dynamics for the residential sector.

2.????COVID has brought to the fore the need for home ownership. Add to that the need for home upgrades with bigger and more flexible configurations.

3.????While a lot of buyers are attracted to ready and close-to-completion, unsold inventory, upcoming and new launches by well-known developer brands are also gaining momentum.

4.????We have seen a time-correction as well as real correction in housing prices over the past 3-4 years.

5.????Affordable synergies are at an all-time high, as a combination of low interest rates, stagnant prices and attractive buying schemes create a conducive environment for homebuyers.

6.????Fear of job losses in the wake of the lockdowns have abated substantially and with economic recovery well on the way, homebuying decisions are likely to gain strength.

7.????Amid a gradual Return to Work and emergence of a hybrid work model, people are expected to return to the cities and look for homes once again, given the need for tangible asset ownership while ensuring their health and safety in a home of their own.

8.????On the supply-side, buyers have never had it so good in terms of options as well as lucrative schemes on offer.

In the festive season, be prepared for extended benefits for home purchases. Offers on straight price discounts, limited period pricing for new launches, waiver of car parking charges, no pre-EMIs on under-construction properties, discounts on floor rise charges plus added incentives with white goods, etc., are likely to keep pricing fundamentals steady and push fence-sitters as well as potential homebuyers into action.

Recovery in homebuying trends

We noted indications of festive demand in 2020, as Q4 2020 recorded a 112% q-o-q growth in launches and a 51% growth in sales. While these statistics may point towards pent-up demand, the fact remains that fundamentals of homebuying have undergone a shift with changes in our lifestyles in a post-pandemic world. Demand for homeownership was seen to be rising among millennials who swore by the shared economy earlier.

While affordable housing was a key driver of demand recovery, mid-segment and large-sized apartments made a demand recovery as well. In fact, the demand for low-rise, independent floors has never been higher. A reflection of these trends continued in H1 2021 as well. Despite the localized lockdowns in Q2 2021 leading to a sluggish quarter with sales and launches declining by 23% and 20% q-o-q, respectively, they compared favorably to the drop of 61% and 64% in sales and launches, respectively, over last year. In fact, H1 2021, was up by 18% y-o-y in terms of sales and up 10% in terms of launches, indicating that a sustained recovery is underway.

Synergies prevail for prospective homebuyers

Disruption may not always be negative. Given that industry disruptions have improved the housing landscape in terms of transparency and consumer protection, we expect the recovery pace to remain on track. In fact, we expect that given the current market recovery, the festive season is primed to build upon the robust signs seen in the past 2-3 quarters. In quantitative terms, early indicators for Q3 coupled with the festive season kicking off, as offers start to roll in thick and fast from October onwards, sales in H2 2021 are likely to be 30-35% higher than H1. We continue to keep an eye on COVID infection rates and the rising vaccination levels, whose pace gives us greater hope of controlling the pandemic.

Any short-term disruptions will remain just that, but rapidly recovering economic indicators will support the resurgence in the housing sector. We may be some time away from achieving the performance of the golden years, but this festive season is expected to be the start of a phase for building on a market that is now steeped in ground truths and sound fundamentals.

In short, a new golden period is around the corner!