REAL ESTATE OUTLOOK 2021
THE YEAR 2021 WOULD REQUIRE REAL ESTATE TO REIMAGINE THE WAY IT HAS OPERATED SO FAR. INDUSTRY EXPERTS SHARE THEIR VIEWS ON HOW THE REAL ESTATE STORY WILL UNFOLD IN 2021.
Harshavardhan Neotia, Chairman, Ambuja Neotia Group, “The pandemic may, in 2021, affect buyers' preferences in terms of choice of real estate: larger layouts with higher safety, hygiene, and captive amenities may find more takers. In terms of commercial real estate, satellite offices in non-conventional micro markets are likely to be a new asset category. Vacancies in retail are already in decline and an increased uptake of the same is to be expected throughout 2021. Despite the short-term disruptions, India's commercial real estate sector continues to attract interest from occupiers and investors looking at the long-term horizon. In summary, with a slew of economic and policy reforms and stimulus packages introduced by the authorities, the sector will have a positive outlook in 2021 increasing the demand for good products from reputed developers.”
Neeraj Bansal - Chief Operating Officer - India Global, KPMG in India, “On the back of several factors including liquidity infusion by RBI, relief under EPF and reduction in home loan rates, the residential segment is expected to gain traction from both developers and buyers. India is likely to witness further penetration of flexible workspaces, throughout 2021 and beyond. With businesses exploring co-working spaces to hub-and-spoke models, the de densification of office spaces is expected to become an imperative in near-to-medium term. India's real estate market is now witnessing an upsurge in tech-enabled developments. The adoption of new-age technology tools is likely to become a permanent feature of the industry in 2021 and beyond.”
Rohit Gera Managing Director, Gera Developments, “There are clear signs of demand coming back to the real estate sector. Whether this is a sustainable bounce back or pent up demand will be revealed in the months to come. The reduction in interest rates multiplies the increase in affordability and with the number of new projects going down, home buyers today have far less to choose from. This has contributed to people accelerating their decision to purchase their homes. While these are all positives, the structural problems of high leverage, outstanding debt and stagnant projects has still not been addressed. Developer margins have been eroded on account of additional interest burden and overheads payable through the lockdown."
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM, “The market looks promising for the current year as 2020 has been very difficult year for people. Those waiting to invest are looking at the year with positivity. Though things have been delayed but nothing is derailed from the path. Especially, the market for affordable housing is robust, and in the coming months, there will be more movement. People have realized the importance of owning a home, and this feeling is going to persist.
C N Govindaraju, Managing Director, Vaishnavi Group, “The industry will see a large scale consolidation thereby restricting the industry to a few good builders that deliver quality products on time. Secondly, the construction industry will have to start embracing new technologies like precast that assures timely delivery and exceptional quality. Most importantly, the industry will take up a transparent customer-centric approach to build the confidence levels of the customers to make substantial sales at the project commencement stage as well.”
Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE. “In these extraordinary times, RE stakeholders across sectors have an opportunity to structurally reimagine their strategies to ensure sustained recovery. Doing so would require shifting from traditional approaches and embracing new, transformational methods — which would be accelerated by widespread tech adoption, sustained policy impetus and accelerated investor interest across RE in India. We believe that with stakeholders becoming increasingly interconnected and dependent upon one another, they would need to jointly develop their RE strategies going forward. Overall, we expect demand for real estate to remain robust and the sector to emerge resilient in the future.”
YEAR 2021 FOR VARIOUS ASSET CLASSES
Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd, “One of the biggest changes that is already happening is consolidation in the real estate space. While some of India’s developers face difficulties in raising funds, the bigger, more established and well-funded players have either taken over or are assisting in the completion of stressed projects. Going forward, we can only expect this trend to continue and provide much-needed structure and streamlining to the real estate sector in India. Buyers are now keen to buy from reputed developers or ready projects. In the coming years, digital infrastructure is likely to enable sales considerably. A major transformation is taking place in the way real estate companies evolve and adapt to ‘the new normal’. This includes dealing with situations like the work-from-home scenario, change in consumer behavior and digitalization of company processes, amongst others. The Covid-19 pandemic is compelling the industry to look at wellness as a major priority area of building design and construction.”
Bijay Agarwal, Managing Director, Salarpuria Sattva Group: “The pandemic has changed our long-held opinions on real estate and how we used to perceive it. One of the primary outcomes of this pandemic, has been an increasing desire for risk mitigation by real estate developers. Another interesting development with respect to the commercial segment was the successful listing of India’s second office REIT during this pandemic. We can expect tailwinds for this asset class continuing in 2021 as well. The residential segment can gain even more traction with themes like inventory funding, last mile funding and affordable/mid-market housing. Besides residential and pure commercial real estate; warehousing, co-working spaces and data centres will be in the limelight in 2021.The demand for both residential and commercial real estate is expected to grow in the next 6 to 12 months.”
Ravi Ahuja Head Commercial Business, L&T Realty, “After a 56% drop in office net absorption in 2020 v/s 2019, the outlook for H1 2021 is expected to be different than that for H2 2021. Cities such as Bengaluru & Hyderabad are expected to be most resilient followed by Mumbai & Pune. The residential space has seen a spurt in recent activities due to government concessions, reduction in the interest rates, etc. To ensure sustainability of activity levels, policies enabling affordable prices for end users is a must. Infrastructure connecting satellite towns with metro cities will decongest large metro cities.”
Harshavardhan Neotia: “There is going to be a change in how people think and live. The buyer sentiment will definitely be impacted. Job insecurity, reduced salaries, savings and business volumes have all disrupted cash flows to the real estate business. On the positive side, the real estate sector has been quick to respond to changes and adapt to new technologies; this is apparent in the digitisation of so many processes. Democratisation of newer platforms and the offering of newer investment avenues has brought about massive shifts in investment preferences that will continue to outlive the pandemic.”
REALTY SECTOR’S ISSUES THAT NEED ATTENTION
C N Govindaraju: “The government should start addressing the cartelisation of the cement and steel companies. These materials have a direct bearing on the cost of construction and thereby the cost of the finished project. It can be detrimental to the real estate sector if left unaddressed. The government should look at a reduction in levies/taxes until the end of FY 2021-22 to support and revive the industry from the pandemic slow down. Make money available on both fronts - customers and builders/ developers. Aid a speedy bounce back through a waiver in the registration fee waiver for FY 2021-22.”
Sanjay Dutt: "Several cash positive projects in the industry are stuck largely due to lack of capital and with no fault of developers. The cost of Governance, Compliance, Capital and State Government delays has made real estate unviable for many. We have made representations to the Government to initiate measures to improve developer liquidity - reduce provisioning requirements for loans to real estate sector, flexibilities offered to the Banks in respect of moratorium, deferral, the customers. The more we tailor make our offerings and address issues of concern; more relevant we shall become.”
Pradeep Aggarwal: “Single window clearance, Input Tax Credit, and industry status to real estate can provide a fillip to the economy. The government also has to ensure that the measures are implemented faster without getting stuck at state or authority levels. A timeline to clear various issues has to be put in place to ensure smooth functioning.”
Ravi Ahuja: “Lessons from 2020 suggest revival of tier 2, 3 & 4 locations. Creation of smart cities require public private partnership models, with long term cheap funding sources. The government should promote the concept of ‘Special Residential Zones (SRZ)’ with social and civic infrastructure support including education, entertainment, hospitals, hospitality, community welfare, wellness etc. Special tax benefits to ‘’Special Economic Zones’’ riding on employment creation as a priority objective should be promoted by Government Policies. Incentive to further strengthen the creation of Cold Storage and Mobility of Frozen Products across geographies will ensure equilibrium in prices and control inflation.”
Harshavardhan Neotia: “I am hopeful to see relaxation in income tax norms, single-window clearance and GST reforms and easing of the liquidity issues. Am also optimistic that the government would give ‘industry status’ to the real estate sector as a whole including secondary housing and holiday homes. Hike the Rs 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income Tax Act to at least Rs 5 lakh to generate healthier housing demand. Personal tax relief, either by tax rate reductions or amended tax slabs, GST waiver for under construction homes, even for a limited period will push demand for under-construction homes. Developers are unable to get funding from major banks and NBFCs at affordable cost. They need a rational capital flow to keep up the supply pipeline.”
Bijay Aggarwal: “Developer has limited resources to acquire land with 100% ownership. The alternate course is joint development on area basis and revenue sharing. Since the implementation of GST on T.D.R is being interpreted for application of GST on transfer of right to develop the land. Due to this amendments, most of the projects either residential or commercial has reduced significantly. Relaxation on GST for joint development transaction on T.D.R, will be a huge relief for developers. The government should also consider allowing input of industry status to the real estate sector will further boost low-cost funds, cut capital costs and make land acquisition easier. To speed up project execution, a single-window clearance system can aid.”
EXPECTATIONS FROM THE BUDGET 2021
J.C. Sharma, Vice Chairman and Managing Director, SOBHA Limited, “Customer experience has emerged as one of the most important trends in our business. People are demanding higher safety standards and are concerned about their productivity, efficiency, and connectedness with the world outside from the confines of their home. Creating digitally enabled business models have suddenly become the norm. The future of real estate will depend on the integration of high-grade efficient delivery of personal mobility, housekeeping, wellness, provision of walking and cycling tracks, payment of maintenance and other fees, digitally enabled grocery, milk and newspaper delivery and other necessary concierge services like payment of user charges, hailing a cab, postal and courier services with high quality living spaces made aesthetically and thoughtfully. All this is possible with the use of intelligent data and analytics which can provide personalised experiences etc. should also be passed on to NBFCs. GST input credit should be allowed for residential and commercial, allow FDI in ready to move in residential inventory. Subvention scheme for real estate should be restored, interest rate subsidy of 3% for all buyers of residential units for a period of 3 years, state stamp duty on registration should be 2% only across all states, remove capital gain and allow deduction of the interest paid to bank from rental incomes of houses. Provide stimulus through taxation measures - increase limits under section 24 b, set more distressed funds, abolish GST on JD Agreements, GST on cement should be reduced from 28% to 12%, allow de-notification of IT SEZ partly or fully or allow domestic rupee earning businesses to operate out of existing IT SEZ without any restriction..”
BUDGET EXPECTATIONS
Sanjay Dutt: "The government should introduce measures for course correction, like granting industry status to the real estate sector and a single-window clearance mechanism for faster completion of projects. One GST, One or No Stamp Duty regime across States are some of the other recommendations. The government needs to introduce reforms for affordable housing, joint development and encourage foreign investment. Another major problem that needs to be addressed is liquidity in real estate. REITS are a viable solution for they enable investors to diversify their portfolio. An investment of up to Rs 50,000 in REITs should be allowed as deduction under Section 80C. Increasing the deduction for interest on housing loan to at least Rs 5 lakh and GST waiver for under-construction homes would also help in boosting the demand”
Neeraj Bansal: “At present, there are varied GST rates for different types of properties such under construction, affordable and non-affordable housing properties, which often lead to increase in statutory cost of the property. At the same time, the on-going labour shortages and low offline sales have led to pilling of unsold inventory. To accelerate demand among buyers, it would be ideal if the government streamline the GST rates and reduce stamp duty charges, at least for the next one year. Difficulty in accessing finance from banks/ NBFCs and lack of long-term cheap finance for large projects has been one of the key challenges for the Indian real estate sector. While currently only affordable housing has been granted infrastructure status, providing the status to the entire sector could unlock lower borrowing rates, increase the flow of foreign and private capital and benefit the overall sector.
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