Is the market more favorable for home buyers after the second wave?

Should home buyers cash in on favorable conditions after the second wave

After posting record sales figures in the quarter between January and March of CY2021, the realty sector witnessed another drop after lockdowns were announced throughout India for fighting the second COVID-19 wave. As per reports, sales figures in Q2 CY2021 may go 58% lower than the earlier quarter since just 24,570 units may be sold as compared to 58,290 sold in Q1 CY2021. Yet, homebuyers are slowly returning to the property market with developers and consultants confirming 40-50% of footfalls seen before the second wave. Lockdowns are slowly being eased and owing to changed circumstances, things may actually be in favor of homebuyers as per industry experts.

Interest rates are already at a decade-low threshold on home loans, improving overall home buyer affordability levels. With borrowing costs being lower, EMIs for loans will also be lesser. Inflation has raised anxieties about rates increasing in the future although experts feel this is unlikely to happen. The RBI has clearly indicated focus on boosting growth in spite of inflation remaining higher throughout this year. RBI will push more liquidity through bond purchase blueprints. This will restrict bond yields and limit interest rate growth as well, as per experts. Banks are unlikely to increase deposit rates owing to lower corporate credit demand.

Banks will instead push for more retail loans. Construction activity continued during the lockdown this year since guidelines were not as stringent like last year when it fully halted. Several developers will face some delays owing to shortage of labor and workers leaving cities for villages prior to the lockdown being enforced, for the harvest season. Yet, laborers are returning to their sites and things will improve for developers who have streamlined contractor payments. The fears relating to another COVID-19 third wave are still present and may impact construction activity in the future. Hence buyers are more inclined towards ready to move units at present.

Several States reduced stamp duty for a limited duration for enhancing realty sales, leading to record figures for Q1 Cy21. Yet, the Maharashtra Government has not extended this cut in stamp duty. The deadline for CLSS under PMAY for MIG 1 and MIG 2 has also expired. Yet, developers are still giving ample incentives for buyers. Offers still exist like attractive payment plans, paying rentals until possession and so on. Developers are giving discounts for sealing apartment deals as per several experts. Prices of real estate are at their lowest in this period as well. Poor sales figures and high inventory have made sure that housing prices remain muted for a long time now. The RBI’s housing price index indicated 1.1% growth in Q3 FY2020-21. Costs of construction have however increased by 10% as per estimates. COO & Co-Founder, Square Yards, Kanika Gupta Shori, has stated that prices of real estate may go up by approximately 5-8% by end-2021 since input costs have gone up considerably and industry leaders are also talking about the mounting pressure on wafer-thin margins. She opined that the price increase percentage may vary across real estate markets although prices will start increasing. All of this clearly indicates that this is the indeed the best time to invest in property.

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Published Date: July 01, 2021