Key trends being witnessed in the housing sector

Real estate is one of India’s most powerful economic foundations. Rapid urbanisation, altering consumer behaviour, regulatory reforms, and the influence of COVID-19 are all fueling this pillar’s evolution right now. After being hammered by the pandemic, the real estate industry has begun to recover.

The year 2021 marked a turning point in India’s residential real estate sector. The strong home market momentum is predicted to continue in 2022, with sales likely to reach pre-COVID levels.

Even as the global economy collapsed, the epidemic prompted odd behaviour in housing markets, with skyrocketing prices and few mortgage defaults. We may see the purchasing frenzy lessening now that markets are at all-time highs. Home sales increased as a result of COVID. This year, trends are likely to revert to pre-2020 levels. COVID compelled consumers to stay at home, frequently with spare time, and sparked a DIY house remodelling craze. Nevertheless, it is believed that the future of home improvement will be dominated by professional services. The rise in property values and available home equity to finance projects is one explanation for the shift. Another factor driving the rising trend is the fact that existing home sales will outstrip new home sales, which normally do not require any work.

The market is propelled forward by the implementation of initiatives that generate demand and encourage people to purchase real estate. The highest demand among buyers in the residential category has been for ready-to-move-in apartments. In times like these, though, it’s critical to better educate customers and manage expectations.

The trends witnessed are revolutionary. The real estate business in India is undergoing a technological transformation. Several cutting-edge strategies and solutions are being implemented throughout the industry. As a result of these new developments, the market’s growth trajectory has increased. One of the most well-known developments in home automation showcases a fantastic mix of technology and real estate. These types of venues have enormous potential to attract a wide range of investment opportunities as well as future-oriented buyers, particularly millennials.

Furthermore, trends that emerged during the challenging COVID-19 era will continue in 2022. Many new residential housing trends have emerged as a result of this transition. The housing sector accounts for a large portion of the real estate sector (about 80%), and it has recovered quickly from the Covid-19 crisis. It has already begun to revert to pre-COVID levels.

Today, no developer wants to take out a loan to buy land. As a result, developers are opting towards asset-light models such as JDAs. DM was once popular, but developers quickly understood its flaws, and JDA now serves as a suitable model for people to follow. People also favour revenue sharing over area sharing because of the GST restrictions.

Maximising FSI was the game in the past when it came to underwriting ambitious approvals. Today’s developers have realised that finishing projects on time or ahead of schedule is more vital than maximising FSI. Developers can grasp the notion of net present value (NPV) with ease.

Integration of technology on a large scale

RERA prohibits the sale of projects on paper, thus approvals are given on the first day. Prior to the start of any project, significant approvals must be secured. Before banks can finance the project, more equity from the promoter is required. As a result, only reputable developers with big funds are allowed to participate in real estate development.

Customers are truly Kings now that RERA is in place. To protect clients’ interests, there are strict restrictions in place. Standard agreements, cancellation procedures, and treatment for delays, among other things, are in place. One-sided contracts with customers are no longer possible. Every developer now understands that sales are the true salvation. Prices are no longer disproportionate to interest rates, therefore now is a better time to sell than later.

Instead of focusing on financial engineering, actual engineering is prioritised. Today’s developers understand that genuine engineering is more important than financial engineering when it comes to completing projects. Previously, when money was plentiful, developers opted for the latter rather than the former, leaving a large backlog of unfinished projects.

Developers have understood that their margins depend on entering a land acquisition at the correct price and receiving clearances on schedule, thus they have outsourced crore activities. As a result, developers are outsourcing their projects and day-to-day operations, including cash flow management, while Promoters focus on business development and approvals. They may manage their businesses more efficiently by sourcing talent at a reasonable cost.

Property that is ready to live in is gaining popularity

Under-construction properties are gradually losing their appeal due to extended wait times and escalating project failures. As a result, ready-to-move-in homes are becoming increasingly popular. Many builders have embraced the business strategy of building first and selling afterwards in order to accord with this viewpoint. This popular home concept in Europe and America is making inroads into India’s real estate market.

Investing choices that are appealing

With the need that Real Estate Investment Trusts (REITs) have 80 percent of their underlying assets be operational and income-generating, such properties have become a stronger investment alternative than traditional possibilities. It’s a low-risk technique to diversify one’s investment portfolio. Despite the fact that the pandemic has put a strain on rental cash flow, a strong and upward-trending long-term picture is expected.

The changing real-estate market dynamics have resulted in a gradual growth of non-resident Indian investment over the last few years (NRIs). Furthermore, since the establishment of the FDI (foreign direct investment) road, India has been the preferred site for NRIs to pool their funds. The sector will undergo a paradigm shift in the coming years as the influence of non-resident Indians grows.

Increasing adaptation of technology and the Proptech Revolution

Despite the fact that many Indian businesses have been hesitant to adopt technology, real estate has always been at the forefront when it comes to using its power. In addition, millennial homebuyers have been influenced by their continual exposure to new technologies. As a result, homes with a high level of automation and Internet of Things (IoT) technology are becoming increasingly popular.

The fast acceptance of Proptech solutions in all parts of real estate—from construction to sales to customer engagement and asset management—has been one of the most notable elements of 2021, and this trend is expected to continue in the future. Before the viral epidemic rocked the global business ecosystem, the proptech market had progressed beyond enabling online property search to provide consumers with end-to-end solutions.

Ownership of properties and larger residences are becoming more popular

Property ownership has become increasingly popular. Although this has aided in the formation of good consumer sentiment toward residential real estate, it was the support of the government and banking industry that got things started. Demand and supply metrics improved as a result of the convergence of these two elements.

Many homeowners have realised the practicality of larger homes after spending a significant amount of time working indoors. As a result, demand for slightly larger homes with multifunctional areas such as workstation and activity space, as well as extra breathing room, has skyrocketed.

Distance is no longer a matter of concern

Most businesses will keep their remote work culture alive while also experimenting with some form of WFH culture for their employees. This eliminates the requirement to purchase a home close to your office, giving prospective homebuyers more options because they can now make judgments based on factors other than the “distance from workplace.” People will migrate to sites within inexpensive localities if the walk-to-work culture loses its allure.

There’s no denying that the real estate sector is undergoing huge changes, with so many new, positive developments.

(By Srinivasan Gopalan, Chairman, Unitern Advisors Pvt Ltd)