T he outbreak of the pandemic last year has shown how quickly our world can change. It has yet again proven that the mobility of humans, goods and services is crucial for a thriving economy. The devastating impact of Covid-19 has been felt across the globe, and the subsequent lockdowns brought everything to a grinding halt. The crisis has resulted in one of the most significant social and economic crises since the Great Depression of the 1930s, and like most sectors, the real estate industry was severely impacted too.
Having said that, there have been changes within the buyer community during the period. For instance, the lockdown in 2020 made potential home buyers revisit the importance of owning a home. The renewed demand, supported by timely government measures, served as a catalyst for the sector’s revival and development. There has been a growing consensus that the sector is now witnessing a steady recovery.
A few key trends noticed over the last year include:
Relocation intentions: Since last year, families around the world in search of increased space or second homes have landed new jobs, and many more are looking to do so. According to Knight Frank’s Global Buyer Survey 2021 report, nearly 26% of mid-segment home buyers with an annual household income between ₹10 lakh and ₹25 lakh shifted to another residence within the pandemic period. These relocations were motivated by factors like the want of more open space, modern amenities, proximity to friends and family, easy access to the workplace, among others. The survey also highlighted that cities such as Chennai, Hyderabad and Pune had the maximum number of homeowners who are looking to relocate in the next 12 months or so.
Attitudinal shift among buyers: The COVID-19 pandemic has fundamentally altered the way home buyers think of their dwellings. Consumer behaviour has changed significantly leading to a structural shift in the manner they look at how to live and where to live, including their sentiment towards home ownership. The projects equipped with work-from-home and study-from-home spaces, are preferred by buyers today. Consumers are also looking for projects with well-designed architecture, equipped with uncluttered spaces and a wide range of recreational spaces.
The Global Buyer Survey also indicated that in Chennai, buyers predominately considered a new residence for upgrading their primary residence. Whereas in Bengaluru, upgrading a family’s primary residence and seeking a holiday home were the most important reasons for considering a new home. Buyers in Hyderabad, on the other hand, evaluated a new residence on the basis of an increase in their family’s size. Although, pan India, upgrading the family’s primary residence was seen as the main reason for purchasing a new home, energy efficiency is also another priority for individuals evaluating home purchase in the future.
Holiday homes gaining traction:With an increasing number of people now looking for a getaway or workcation, the need for owning a holiday home is gaining prominence among potential buyers. The trend is here to stay, and amenities such as staff rooms, a home office, play areas for children, are now prerequisites being demanded by most buyers today.
Outdoor space and the need for greater privacy have pushed homebuyers in the higher income category to evaluate second home purchases in India. The pandemic has also impacted the propensity of the budget that an individual sets aside for a home. As uncertainty prevails, many have started considering a home as an essential financial security, with buyers from Chennai and Hyderabad increasing their budget for homes (as per Knight Frank Home Buyers Survey). The Survey highlights that almost half of the respondents from southern cities; Chennai (57%), Hyderabad (55%), Bengaluru (47%) have cited a desire for a second home influenced by the pandemic.
Location is key: The importance of location can never be underestimated when it comes to a home-buying decision.
It has long been the buzzword and is often considered as one of the most important criteria to dictate the way property prices sway. With the pandemic, features which were typically considered the hallmark of a good location have also undergone a change in the order of priority. While factors such as good air quality, proximity to green areas and access to good healthcare have become more important, parameters such as being within walking distance to a public transport hub have slid down in the order of ranking. This used to be a very important add-on to a location before the pandemic.
Respondents to the Survey from the south have majorly cited that after the pandemic, access to large green spaces is an important feature to consider, followed by proximity to adequate healthcare infrastructure.
Buying sentiments and price expectations
As the restrictions placed during the first lockdown gradually ebbed, buying activity started resuming from Q3 2020. States such as Maharashtra, Karnataka and West Bengal have provided stimulus to the real estate sector in the form of stamp duty cuts. With the announcement of stamp duty cuts in Maharashtra, Mumbai saw a record number of home sales, with Q4 2020 registering a clear 80% gain in sales on a year-on-year (YoY) basis.
The lockdown during Q2 2020 and Q3 2020 drove home prices further down, attracting the fence sitters to make the purchase decision. The Survey also stated that a majority of buyers expect the value of their primary residence to increase in the next 12 months across the country. With a better handle on pandemic preparedness and softening of prices in 2020, there is a buoyancy in sentiment for the Indian home buyers.
Watch out for...
On the question of sustainable recovery, it must be observed that the bounce back in residential real estate is seen across major cities in India. With the pandemic induced change in lifestyles, people are finding the need to upgrade their houses. This home buying trend has been further supported by low home loan interest rates and an increase in household savings during the pandemic. There are specifically positive sentiments among home buyers and developers for southern cities such as Chennai, Bengaluru and Hyderabad, indicative of upward trend in demand in the coming months.
Chennai’s ongoing infrastructure development and improved connectivity through the metro rail network in the South and West of the city has maintained its value proposition for many home buyers. In Bengaluru, homes located in the Southern and Eastern parts of the city will continue to remain a favourite amongst home buyers. As for Hyderabad, micro-markets located to the West and North of the city will continue to be the preferred destination for a majority of buyers.
The direction of the Covid-19 pandemic going forward and its impact on the economy will have a strong influence on real estate recovery. The future trend of interest rates in the economy along with fiscal measures adopted by State governments will truly dictate the sustainability of this growth trajectory.
The writer is Chief Economist and National Director – Research at Knight Frank India
