The Reserve Bank of India’s (RBI) 6-member Monetary Policy Committee (MPC) has kept repo rate unchanged at 4 per cent. RBI Governor Shaktikanta Das made an announcement in this regard, which is gaining praise from the real estate experts. They are of the opinion that unchanged repo rate means home buyers would continue to reap the benefits of a record low interest rate regime. They went on to add that low home loan interest rate would work well for home loan borrowers as environment of affordability is expected to continue after this RBI’s decision.
Hailing RBI’s MPC decision to keep key rates steady; Anuj Puri, Chairman at ANAROCK Group said, “With Omicron throwing a shadow of doubt across the world and in India, the RBI has decided to keep the repo rates unchanged at 4 per cent and reverse repo rate at 3.35 per cent. This was expected, and is the ninth consecutive time that the RBI maintained status quo amid current uncertainties. The unchanged repo rates will help maintain status quo on the prevailing low interest rate regime for some more time. This works well for all home loan borrowers as the environment of affordability will continue.”
Echoing with ANAROCK expert’s views; Lindsay Bernard Rodrigues, CEO & Co-Founder, The Bennet and Bernard Company said, “With the positive growth of the economy over the last few months, the RBI leaving the repo rate unchanged means home buyers would continue to reap the benefits of a record low interest rate regime. For any investor, it’s a time of great opportunity and for the end-customer. It’s a good time to buy. People are looking for own homes and are purchasing second homes in the context of the pandemic as they would have a secure and safe home and would also be a good alternative to their primary abode. The green shoots of economic revival coupled with the prevailing low interest rates will be conducive for the residential sector in the short to mid-term. Overall, we hope that the government continues to take measures that will strengthen the real estate sector and affirm robust infrastructure growth.”
Welcoming RBI decision to keep repo rate steady; Gautam Thacker, President at NAREDCO — Neral-Karjat unit said, “Keeping the repo rates unchanged augments the best decision during such times to keep the progress the economic growth. It also means the home loans will remain attractive and in-turn will keep up the momentum in real estate. In short, it’s a very positive decision for the Indian economy.”
Calling this RBI’s decision an opportunity for new home buyers; Pritam Chivukula, Secretary at CREDAI MCHI (Maharashtra Chamber of Housing Industry) said, “We welcome the RBI’s decision to continue with their accommodative stance keeping in mind the economic uncertainty due to the new COVID-19 variant Omicron. The low interest rates have been a crucial factor in the revival of the demand in the real estate sector. The sector saw a good festive season on the back of rock-bottom interest rates on home loans along with festive offers from good developers. The buyers are already coming back to the market and we feel that this might be the last opportunity for the home buyers to purchase property with low interest rates before RBI decides to hike it in their next policy announcement. Also, to keep the prices down on the account of rise in raw materials prices will be a huge challenge in front of the developers.”
The RBI continued to maintain its ‘accommodative’ stance with five MPC members voting in favour of the same. The repo rate, at which the RBI lends short-term funds to banks, has been left steady at 4 per cent whereas the reverse repo rate, at which the RBI borrows from banks, also remain unchanged at 3.35 per cent. The Marginal Standing Facility (MSF) & Bank Rate also remained unchanged at 4.25 per cent.
Real Estate | Why is India’s affordable housing segment shrinking?
News Source: Money Control
E JAYASHREE KURUP
As prices move up, inventories drop, and active home buyer numbers show only a marginal drop, the Indian housing industry finds itself at a crossroads
Urban India has housed itself very well in the past three years. After an almost seven-year hiatus, housing demand picked up, hitting unprecedented levels during the pandemic. Major reports issued after the first half-year analysis in 2022 showed more launches, higher sales, and increasing levels of ownership among end-users.
However, home buyers in India, like the country’s economy, have been divided into two distinct sections. After the pandemic, those employed in the upper strata of the workforce, especially in IT, BFSI, and formal industries, have performed well and with three years of limited or no spending, have used the corpus they accumulated to buy homes to live in. The lowest-ever level of home loan interest rates also ensured that borrowers were able to get more finance to buy bigger homes.
The Rs 1 crore and above homes witnessed a growth of about 25 percent, according to a Knight Frank report. The Gera Pune Residential Realty report pegged sales in Pune city at 105,625 homes, a 25 percent growth year-on-year. The Anarock report recorded brisk sales in the January-June period with the second quarter recording lower sales than the January-March quarter.
Interestingly though, the Gera report pointed out the stark difference in sales patterns in 2019 vs 2022. Budget homes costing less than Rs 4,236/sq. ft. accounted for a mere 28 percent in 2022, compared with 57 percent in 2019. The share in new launches of affordable homes has correspondingly dropped from 42.2 percent in June 2019 to 21 percent in June 2022. Meanwhile, the share of super-premium luxury housing of about Rs 8,000/sq. ft. and above, rose from 0.6 percent of the total stock in 2019 to 2.2 percent of the total stock in June 2022. Today, it accounts for 20 percent of new stock released.
So, what has resulted in this change? The housing industry, like the automobile industry, is shifting towards to the premium segment at the cost of the budget category. Last week, Maruti Suzuki announced its intent to focus on premium SUV segments, and downplay or even consider moving out of the value and budget cars. The consumer base displaced from the workforce during the shutdowns have now re-entered as part of the gig economy. They have the earning power to stay in the city but not enough to purchase an asset where the payments are large and long-term. In many cases, access to credit is also a challenge as security of tenure is not assured.
This affordable housing segment was also the most sensitive to rise in interest rates. As the Reserve Bank of India (RBI) raised repo rates to contain inflation, home loan interest rates have risen too, and are likely to rise further. This effectively means that the amount of loan that can be accessed by a borrower falls and, in many cases, becomes less than what is required to buy a house in the affordable category.
The Magicbricks Propindex for June 2022 noted, “The average rates of ready-to-move (RTM) properties saw an upward movement by 2.3% QoQ & 6.4% YoY”. While the mid and premium segments can still afford to absorb that, the lower income categories, already squeezed by inflation at home, may opt out of buying for the medium term. This may lead to a robust demand for rental housing in the affordable segment.
The real estate industry needs safeguards. The pace and strength of home buying over the past three years was triggered by the fear of moving around during the pandemic as well as the pent-up demand of the past seven years. The advent of the Real Estate Regulatory Authority (RERA) six years ago pushed the industry to use collected money to complete projects, and maintain escrow accounts. This led to increased consumer confidence. The evidence on the ground that showed stalled projects moving towards completion also added to the consumer confidence levels.
Buying completed inventory at a time when consumers wanted to own houses rather than leasing it, was relatively risk-free. The risk of the wait period, and delay, was practically eliminated.
However, every report today points to much lower inventory overhangs of just 7-9 months left. Will consumers continue to buy under-construction properties at the same pace, even with RERA in place? Will developers ensure financial closure of projects before launch so that they have enough money to execute, even if sales volumes are low? Will the volume of luxury properties being built continue to be picked up at the same pace?
The industry is at a crossroads. It has resorted to launching smaller phases of projects, and is focussed on execution and delivery. Buying trends are far from stable, and may continue to change. But an agile and restrained industry should be able to meet this demand.
E Jayashree Kurup, Director, Real Estate & Cities, Wordmeister Editorial Services, writes on real estate and housing. Views are personal and do not represent the stand of this publication.
Investments in real estate reach $2.6 bn in H1 2022; office sector leads with 48% share: Colliers India
News Source: Business Today Desk
Updated Jul 11, 2022, 1:28 PM IST
As per the Colliers India report, office sector led on the investment inflows front on the back of large technology companies continuing to lap up office spaces. Moreover, as per the report, investors too are taking a long view of the sector.
Institutional investments in the real estate market went up to $2.6 billion during January-June 2022, an on-year rise of 14 per cent from H1 2021. Investment inflows were led by office sector which accounted for a whopping 48 per cent, according to a recent report by the professional services and investment management company Colliers India.
Office sector led on the investment inflows front on the back of large technology companies continuing to lap up office spaces. Moreover, as per the report, investors too are taking a long view of the sector and binding assets into REITs.
For H1 2022, the retail sector followed up with a 19 per cent share of investment inflows on account of expansion of fashion and F&B brands, completed malls becoming investment avenues, and pickup in footfalls in malls. Investments into the alternate assets went up 53 per cent on-year to $370 million in the same period as investors looked to diversify their portfolios as deals during the period included data centers, holiday homes and life sciences.
“Moreover, there is untapped potential in India’s alternate assets which investors are looking for from a diversification perspective. During H1 2022, inflows in alternate assets accounted for 14 per cent of total investments. The next few quarters will see some greenfield investments, especially in the office and industrial & logistics sector,” said Vimal Nadar, Senior Director and Head of Research, Colliers India.
Industrial and logistics sector and residential sector, on the other hand, saw subdued inflows during the first half of 2022. Talking of on-year change in investment growth, the report further stated that investments in the office sector went up by 20 per cent while retail sector saw a whopping 537 per cent rise in investments year-on-year, the study pointed out.
“The first half of 2022 has witnessed euphoria of businesses bouncing back with increased office and industrial leasing, retail and travel spend, and continued buoyancy in the residential sector. However, the market is seeing some caution on account of geopolitical tensions and increased expected risk-adjusted returns,” said Piyush Gupta, Managing Director, Capital Markets & Investment Services, Colliers India.
Talking of investment hubs, Delhi-NCR continues to lead the pack with highest inflows of 35 per cent, followed by Mumbai with 11 per cent share and Chennai with 10 per cent share. Multi-city deals continue to remain highly preferred among investors with 43 per cent investments during the first half of 2022.
Domestic players are also back with a bang as domestic investments into the real estate market comprise 38 per cent market share in H1 2022, a jump from 13 per cent in the same period last year. Domestic investors inclined towards mixed-use assets and retail sector, the Colliers India report noted.
Maharashtra: Property registration revenue dips in November but continues to remain above average
News Source: The Free Press Journal Journalist: Varun Singh
Stamp duty is a major source of revenue for the state government. On average in this financial year, the state government’s treasury, received Rs 2,500 crore through registration of properties and other documents with the Department of Registration and Stamps.
In October the figures had crossed Rs 3,200 crore mark and hence, when in November the figure came down to Rs 2,700 crore there was a hullabaloo that the real estate market was negatively impacted.
He said November had almost 10 holidays, including Diwali. Hence during the 20 working days, the collection of Rs 2,700 crore is a huge revenue. Last year, November had witnessed a substantial rise in registration as the state government had offered a discount on stamp duty from September 2020 to March 2021.
This prompted the developers to pass on the benefit to the home buyers, who too, rushed to buy homes. However, this year there was no such offer, yet the registration figures have surpassed the pre-pandemic days on many occasions.
When asked about the dip in registration figures in November compared to October, former president of CREDAI-MCHI, Nayan Shah said, “It’s natural, it has to happen, things peak then there is a valley.” The sales were less in November compared to October, and experts believe, availability of limited ready housing units and under construction not getting much traction could be a reason behind the dip. Pankaj Kapoor, MD, Liases Foras, a real estate research firm said, “I think there was a dip in sales post Diwali.
Mainly the pent up demand mostly got consumed. Besides, now there is limited ready stock available in primary as well as in the secondary market. Under construction units are still not gathering traction.”
Hardikar claimed the registration figures aren’t going down and predicted that in December too, the state may get revenue up to Rs 3,000 crore from registration. “Till the evening of December 16, the revenue generated was Rs 1,700 crore, by the end of this month the figure can touch up to Rs 3,000 crore,” he said. While the government is hopeful that the revenue shall keep coming in, experts and developers have a different opinions.
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