The pandemic took the country by storm and its toll on the economy cannot be
understated. While the country is slowly emerging from this turbulence there is a silver
lining out there for real estate in 2021. However we need to take a step back to broadly
understand what happened to the housing sector in 2020 if we are to make informed
predictions for this year. With the onset of Covid 19, demand for residential properties
slumped and new project launches were put in abeyance. The RBI introduced a moratorium
on term loans and infused Rs. 3.74 lakh crore to address short term liquidity crunch to
breathe some life in this key area of the economy. But all was not lost. During this
period, demand for plotted land development and affordable housing began to gain
traction especially in the south as well as Pune and Gurugram. We expect these two
segments of the realty sector to continue being the growth drivers in this New Year.
What prompted such a movement in an economic environment that was bleak and that too in
a sector that was facing a fund crunch and high inventories? A primary reason could be
attributed to a change in the mind-set of potential customers in terms of owning an
apartment or land that comes with flexible design options that will meet the
restrictions imposed by the pandemic. Furthermore, investments in plotted lands are
lower as compared to a ready to move in apartment combined with the fact that land value
always appreciates as compared to other asset classes. It is also known that land prices
are impervious to market sentiments. Growth for smaller plotted lands is predominantly
seen in cities such as Bengaluru and Chennai, while the appetite for larger land
holdings are noticed in other cities. This push towards plotted lands being developed by
reputed builders will lead to stabilizing the real estate. Prices of plotted lands are
also reasonable and therefore nudged customers to invest in such properties. With road
and metro rail connectivity expanding and the fear of living in a pandemic environment,
people are now preferring to move to areas that have standalone houses. An emerging
scenario of this infrastructure development is the growing clusters comprising of
plotted or affordable housing projects coming up in the peripheries of larger towns and
cities.
The other area that created demand in 2020 and will continue to do in 2021, can be
squarely attributed to affordable housing. In the recently announced Union Budget, the
Finance Minister extended the tax holiday for the affordable houses projects by a year.
This will be a shot in the arm for developers in this space. The government’s ‘Pradhan
Mantri Awas Yojna (PMAY)’ coupled with the 1% GST rate cut from the existing 8% has
definitely had a favourable impact on the affordable housing segment. Simultaneously the
government has also extended the Credit Linked Interest Subsidy Scheme till the end of
FY 20-21. For customers seeking sub Rs.45 lakh houses there is a window of opportunity
to own a house. While demand will continue to move in the positive direction, the newly
instituted Special Window for Affordable and Mid-Income Housing Investment Fund for RERA
approved affordable segment will ensure that there are no bottlenecks in the supply side
when it comes to funds. Reduction in stamp duty, implemented by some states has also
played a role in people making up their minds in purchasing an affordable home.
While we see a rise in demand in the housing sector, this trend will not be a flash in
the pan. Though the long standing demand for granting industry status to the realty
sector is yet to be realised, the current growth is a proof of the resilience of this
sector. Several reputed builders see the potential of plotted properties and affordable
housing as key areas of development and are now seriously moving in this direction. The
government too is contributing to making this a reality. Potential customers too have
felt the need to own land, the value of which never depreciates. Looking at the larger
picture one can only say that 2021 will be a watershed year for real estate and home
buyers.
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