Page 59 - Kolte Patil AR 2019-20
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Emerging trends during COVID-19

            The novel coronavirus originated in   assets provide the highest security in   have reduced them substantially due to
            China and was declared as a global   times of crisis,             economic uncertainty as a result of the
            pandemic on 11 March, 2020 by the   y yFurther driven by all-time low rates of   lockdown
            World Health Organization (WHO),   interest on home loans         y yMajority of the buyers now favour
            which was closely followed by a global   y yBengaluru, Hyderabad and MMR   risk-free investments. The demand for
            lockdown. The lockdown had a massive   witnessed the highest number of   developers having the least execution
            impact on the world economy as well as   bookings just before and during the   risk is at an all-time high, even if the
            various sectors across the globe, include   lockdown as a result of the developers   properties are higher priced.
            real estate. However, it has also opened   placing extra emphasis on digital sales  y yBuyers looking for properties from
            up some opportunities for the real estate                         an investment perspective prefer
            sector. According to the ANAROCK   y yDemand for the affordable   ready-to-move-in (RTM) homes over
            Consumer Sentiment Survey, the   housing segment has not decreased   under-construction ones due to the
            following trends were noticed:   despite concerns over its target
                                             audience’s limited income and rising   uncertainty regarding the resumption of
            y yHome ownership has become a   unemployment rate. In fact, buyers,   construction activities across the nation
            priority for the millennials after the   who previously had higher budgets,   (Source: Financial Express)
            outbreak of COVID-19 since physical

             Improving affordability
            Since 2013, real estate prices have   is also very favorable from buyers’   affordability parameters indicate that
            underperformed the broader per-capita   standpoint. The government is focusing  once COVID-related issues recede,
            income growth as well as consumer   on affordable and mid-income housing   housing market volumes could expand
            price index. Interest rates on mortgages  through an interest subvention scheme   over several years based on latent
            have also declined significantly to the   and tax breaks for developers of low   demand in a supply-deficient market.
            lowest levels in several decades, which   ticket sized housing. These improved

             Industry consolidation is the underlying theme
            The Indian real estate industry is highly  20% of the directly addressable market   equity and debt funding. However, the
            fragmented – however, following the   in Top cities. Structural improvements   emerging trend of working from home
            cyclical downturn, government actions   already in place should allow large   and weak employment generation in
            and legislative reforms, there is ample   developers to launch operations in more  a weak economy reduces the growth
            scope for consolidation to the benefit of   cities, as well as gain market share   potential across the near to medium
            strong developers capable of executing   in existing markets. (Source: Jefferies   term. Lease rentals are expected to
            projects in a timely manner. Smaller   Equity Research Report)    decline in this time frame.
            players, with weak market position and   Capital availability is a key   NRI influx: There has been strong
            leveraged balance sheets, are already   differentiator: Weak demand, multiple   traction from NRI customers in the
            finding it difficult to sustain. Overall,   disruptions and shrinking NBFC   last few months. Advanced digital
            the residential real estate market may   funding have shrunk the capital pie   tools like 360 degree project walk
            move in the same direction as the   for developers, extending the relative   through have heightened the customer
            commercial property development   market potential for leading execution-  experience and allows meaningful time
            market that sees a much higher market   focused players. Further, customers’   to research properties online. Recently,
            share for leading real estate brands   preference continues to gravitate to   the number of expats leveraging the
            coinciding with a much higher level of   completed apartments, which increases  rupee depreciation versus dollar has
            customer confidence.
                                             the deployment of capital per unit of   increased. Most surveys indicate that
            Currently, within the framework of   inventory and pushes back cash inflows  real estate is still considered a top
            the housing market in India, weak   from the sale transaction. Availability of  investment asset by Indians abroad.
            property prices, low apartment values   capital at reasonable costs is therefore a  Further, given the mass job cuts in the
            and limited scale of market demand in   key differentiator.       US and Europe, their unemployment
            smaller cities means that top developers   Weakness in lease rentals : The lease   numbers have increased substantially;
            confine their operations to a few top   rental market in commercial real estate   and this will lead to reverse migration
            cities, which represent about 40%   had previously trended higher based on   to India. Going forward, NRI segment
            of the overall market. The organised   supply being confined to few developers   is expected to contribute increasingly
            developers currently control <10% of   and supported by availability of private   towards sales.
            overall market opportunity and ~15-

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