By Anuj Puri
The trend of the Indian festive season becoming the annual high point for housing sales originates from traditional sentiment. Simply put, it is considered a fortuitous time to invest in wealth-creating assets. While traditional sentiment is obviously still involved, it eventually ceased to be the most important driving factor behind housing traction.
Sales in this period are now primarily driven by the fact that developers and lending banks roll out the most attractive offers of the entire year during the festive season.
That said, festive season 2021 is unique in many ways. There is also a lot of demand for homes – both old demand (pent up from before the Covid-19 pandemic) and new demand - coming from people who were content with renting homes before. One of the most defining features of today’s housing demand is that even millennials are now on the market for homeownership.
This was a predominantly 'renting generation' which preferred to use its money for other investments and purposes, not for buying homes. There are reasons for this change.
Reviewing A Nightmare
Above everything else, the pandemic had the effect of intimidating people, institutions, and markets, inducing a feeling of having no control over what was happening. Everything depended on what a virus did next, and how people reacted to it. Life became impossible to predict and the media was filled with news and horrible images of death, devastation, and danger. For a long time, jobs were lost at worst or uncertain at best, salaries and markets nosedived, and most people’s investments lost value.
In this environment, people tend to long for a sense of stability, control, and predictability. To the backdrop of constant warnings to stay at home, and with offices and schools closing indefinitely, our homes became our first line of control and defence. Within our four walls, we are in control of our lives and can safeguard our families.
While the job markets remained weak, people began leaving their rented homes in the cities and returned to their native towns and cities to live in their family homes.
The trend of ownership housing gaining sudden popularity during the pandemic was first seen in the UK, United States and Middle Eastern markets like Dubai. While housing demand spontaneously grew in these countries, India was still reeling under first wave of Covid-19. However, as soon as site visits became possible again and the Indian job market stabilized, Indians began to scout for ownership homes in 2020.
Aware of the increasing interest in buying homes and the need to revive consumption and lending, the central and state governments began rolling out incentives last year. Maharashtra announced a well-timed stamp duty cut which made a huge difference in cities like Mumbai and Pune.
However, the overall news on the pandemic was still negative and various restrictions on movement remained in place across the country. In short, festive season 2020 was anything but festive.
Festive Season 2021 – A Time of Transformation
Festive season 2021 comes at a time when most restrictions within the country have been lifted. While business from NRIs remains tepid because of international travel bans, the domestic housing market was booming even before the onset of this year's festive season. Indians are now moving freely, restarting their businesses and attending office, socializing and going on site visits. Even the malls have opened shop as cases have reduced drastically in most states.
The current mood calls to mind Tagore’s famous prayer that begins with the words “where the mind is without fear, and the head is held high…” This year, the festive season is extremely significant for the housing market. Even from a traditional point of view, because there is a very real sense of good having triumphed over evil.
A huge number of Indians will book their dream homes in the next two months – as a celebration of overcoming the worst nightmare of the century, as a safeguard against any such disruptions in the future, and to benefit from deals which may not last much longer.
Already, property prices have risen by between 3-4% in many cities, and the RBI will keep the repo rates reined in only as long as the economic situation remains sensitive.
ANAROCK Research indicates that we may see at least 10-15% growth in housing demand in the ongoing festive period (Oct.-Dec) across the top 7 cities against the preceding quarter. In Q3 2021, the top 7 cities saw total housing sales of approx. 62,800 units – already the best quarterly sales since pandemic.
If our current predictions hold true, the ongoing festive quarter will see at least 35-40% yearly rise in overall housing sales across the top 7 cities when compared to the same period last year. In Q4 2020, the top 7 cities saw total housing sales of about 50,900 units.
Sustained Revival or Flash in The Pan?
The long-awaited housing market revival is underway even before the pandemic is fully subdued. Whether it will last well into next year and beyond remains to be seen. The normal laws of the market will soon begin to take hold again. Increased demand leads to increased property prices, and increased consumption and decreased inflation lead to higher lending rates.
Nevertheless, the fundamentals for a sustained revival phase are strong because the current housing demand is considerable, driven by end-users who long to fulfil their long-cherished aspiration to own homes. The onus of fostering and nurturing this demand long beyond the festive season lies on RBI and government support and interventions - and on developers, who decide at what price they should sell their properties.
The author is Chairman, ANAROCK Group