Unsold inventory sees major sales in most Tier 1 cities pushing residential sales into a very good growth trajectory after major decline- Zennlivving advisory survey

The pandemic had slowed down the real estate industry to a point of standstill a year back.

Developers being stuck with unsold inventory, channel partners unable to provide clear answers to end users, the unending pandemic situation all these factored into creating a deep dive for the real estate sales industry from the end users in India.

2020- Around 1.5 lakhs unsold inventory across tier 1 cities

2022- More than 1.6 lakhs unsold inventory sold out in tier 1 cities

From 2020 to 2022 its been a whirlwind of a journey for most residential real estate developers and stakeholders. And the industry of course has taken a great leap towards solving these problems as well.

Some key notable trends:

• Technology adoptions
• High end residential sales remaining steady
• Investors acquiring major property deals during the dip
• Being digital first approach by most developers
• New supply and sales may reach 2019 levels by the next year i.e. 2023.
• Interest rates may start inching up from H2 2022.
• Prices may appreciate in the range of 5 – 10%
• Grade A and organised developers will continue to acquire a major portion of the market
• Mid-end and high-end housing segments will continue to drive a majority of the demand.
• PE investments in the residential segment to rise further. The residential segment’s share of PE investments has already increased to 22% during 1H FY22, from 14% during the same period last year.
• All these are really good news for all stakeholders in the real estate industry.

Inflow of capital into Real Estate Stocks

In 2021, Real estate stocks saw a very stable ROI expectations from stock markets. Though the various lockdowns and arrival of new variants of covid, did slow down the market movement a bit, but largely have remained stable and hence showed satisfactory ROI’s for most investors.

Towards the later half of 2021, however real estate stocks boomed with developers seeing a good return of their sales numbers to its previous levels and the end users happily welcoming launches of new projects.

The writing was on the wall for a recovery of the real estate sector with large players now commanding a very strong share of overall housing sales. Demand remains high as Both retail and end users continue to spend considerable time at home due to WFH and remote working.

The interest rates becoming a decade low (starting at 6.5%) and overall increase in employment numbers enabling the public to support long term investments have provided a great boost to the industry.

The positivity around physical indicators such as new launches and sales is reflected in the stock markets.

The S&P BSE Realty Index was at 1,423 on 27th March 2020 to 2501 in early jan 2021 to 4028 by December 2021, this clearly shows the phenomenal trust and investments that has been made into the real estate industry over the past 2 years bringing it back to pre-covid numbers and even higher.

OVERALL PERFORMANCE OF 2021- Winners by segments

The demand for large houses has seen a steep increase from the end users with WFH and online schooling becoming the new normal and projects priced between 75 lakhs to 2.5 CR saw a steady sales ratio during 2021 considering the previous years.

The drive for sales by developers and channel partners giving steep discounts also played a crucial part in increasing this segments sales numbers as homebuyers looked to cash in on good deals while it lasted. Again, this was the story for the major developers who showcased great and quick adoption to a digital first approach in reaching out to end users during the lockdown easing period.

However the affordable housing segment had a different story to tell over the same period. It saw a steep slow down mainly because:

• Significant supply addition already in the books: More than 1.5 lakh units have been in ready supply from 2019 which is approximately just less than half the number of new launches from 2019 to 2021. Developers took a good relook at the situation and made fast decisions to focus more on their execution than adding new inventories in the same category.
• An affordable housing development is a high volume business- low margin business – and in the current market conditions, very few developers have that luxury with its long gestation period.
• A large segment of those affected during COVID-19 was the affordable segment homebuyers, causing a steep decline in its demand.
• With the covid threat slowly moving out, The Government is taking on steps focused on the affordable housing segment and is doing its best to help increase the demand of affordable housing projects through its various incentives to developers as well as buyers.

Overall, the industry has made a strong comeback and even progressed from its earlier highs. Most developers have adapted to the new world of digital and technological advances and new and innovative designs are being experimented on and developed by major names in the industry.

Zennlivving.com is one of India’s largest real estate investment and marketing firm operating across the country that invests, partners and works with real estate developers, channel partners and property owners maximising profit yields for all its stakeholders.