Real estate is a classic ‘cyclical’ sector as commonly defined by market pundits and true to this definition this segment, through the almost forgettable 2020, reeled under a depressive environment. With deceleration of the economy leading to job losses, reduction in income and uncertainty about the future, real estate was among the worst performing; even the steep drop in the lending rates offered little comfort.
Though the scale of losses incurred is not known, sales were reported to have dropped by a whopping 80% after the pandemic broke out. The problem worsened with labour issues due to mass migration and with drop in sales suddenly, supply exceeded demand leading to glut which further led to liquidity crunch for builders and developers.
But, the last quarter of the year, with hope of a vaccine, declining infection rate and lifting of lockdown restrictions, offered a ray of hope. The buying activity has been quite encouraging which is mostly concentrated on mid-level houses; activity in the high-end segment is yet to pick-up compared to pre-COVID levels. The home loan rates have dropped below 7% after over a decade which also has added to the new vigour seen in middle and upper class buyers. The EMI on a ₹30 lakh loan for 20 years’ tenure at the current rate of interest is approx. ₹2,3000, which at the earlier rates was at about ₹26,000.
The government and the RBI did show their intent by proactively announcing economic stimulus packages with huge liquidity tap opened and by reducing lending rates. These announcements immensely helped lending institutions to push their advances.
The year ended with more of bitter and less of sweet, but all is not over. The year 2021 promises to be an eventful one with vaccination just round the corner and most of the worst seem to have been over. With RBI hinting at lowered inflation levels in the coming quarters and promise of being ‘accommodative’ with interest rates, the home loan rates are set to test a new low which again would benefit builders and buyers alike.
