Stable prices, low interest rates, persistent demand bode well for industry: MD
The real estate sector is witnessing several positive signs that bode well for the industry’s outlook, said Sundaram Home Finance (SHF) MD D. Lakshminarayanan.
“Prices [of housing] have largely remained stable in the last 18 months,” he said. “There is enough inventory to buy. Builders are offering incentives and amenities. Interest rate is at its lowest. Some governments are also offering sops on Stamp Duty. All these are sending out a message to the buyer that on all counts, this is the best time to buy,” he pointed out.
SHF had seen an across-the-board recovery since mid-June that had been ‘swift and strong’, Mr. Lakshminarayanan said.
“For the four months ended October, we registered disbursements of ₹850 crore, the kind of growth numbers going back to the pre-pandemic levels. That is encouraging,” he said. “The recovery has been much more than what we had experienced at the end of the first wave of the pandemic last year,” he added.
Homebuying interest had lasted beyond what could be put down to pent-up demand after the second wave receded, he said.
“Between June and July, when there was euphoria about home buying, we thought those that had put off their purchase plans in April and May because of the second wave were now coming back and that this was pent-up demand playing out. But the subsequent months have shown that there is real demand with the market rebounding with some vengeance. Every succeeding month since July has been up compared to the previous month. First off the block has been the salaried class — those who were looking to buy their first home.”
Lead indicators for financiers signalling the quality of recovery were the pace of construction, the drop in unsold inventories and the number of new project unveilings in the recent past. “Labour remains available in good numbers as the second wave did not see as much migration as the first one,” he added.
He also highlighted the fact that real estate prices remaining almost flat for 18 months would put pressure on builders as input prices — of steel, for example — had been going up. He said it remained to be seen whether builders would pass the additional cost to buyers and how that would impact demand.
Mr. Lakshminarayanan pointed to rising interest for home financing in smaller towns. “From our financing perspective, we have seen a pronounced shift towards tier 2 and 3 towns. Nearly 70% of our disbursements in the first half of this year have been from these locations as compared to around 58% levels in the past.”
Acknowledging that the affordable housing segment had taken a hit during the second wave of COVID-19, he said demand had, however, begun to rebound. “We see this segment coming back quite strongly in all of the southern markets in which we are present. The segment has not shown any significant signs of distress in terms of people putting off their purchase decisions. We are already seeing a number of new launches in this segment across markets. Builders continue to be positive in the below ₹40-lakh segment as this is selling swiftly,” he added.
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