Budget 2021: No Major Sops for Real Estate

Budget 2021

There were quite a lot of expectations from Budget 2021 for the real estate sector. 2020’s extended COVID-19 lockdown and subsequent restrictions on movement of people as well as specific protocols put a lot of pressure on this sector. However, despite this the sector registered a good recovery in the second half of the year, particularly in the fourth quarter. A lot of pent up demand was met and unsold inventory has been reduced to such an extent that developers are now planning new launches across cities to meet the growing demand. In such an environment, it is no surprise that many in this industry expected a number of sops which would further boost real estate. Here are some of the minimal gains from Budget 2021 for the real estate industry:

Budget 2021
Budget 2021

Affordable Housing

The affordable housing sector received a number of sops. The government has extended by one more year the period during which one can avail deduction of interest amount up to Rs. 1.5 lakh on home loans taken for purchasing affordable homes. Thus, one can now avail this deduction for loans taken up to March 31, 2022 for buying such homes.

This sector received a further fillip with the proposed tax holiday for one more year up to March 31, 2022 for affordable housing projects. With these announcements the government has made clear that affordable housing is a big priority. Seen together, this is a big boost for many real estate developers and companies who are constructing affordable housing projects across the country.

REITs (Real estate investment trusts)

The Embassy and Mindspace REITs were surprisingly well received by investors and have been doing well. The Brookfield India REIT which launched on February 3rd is also expected to do quite well. Overall, the sentiment towards this asset class has been encouraging. Providing a further boost to this fledgling asset class, the 2021 Budget has proposed to make dividend payments to REIT and InvIT’s (Infrastructure investment trusts) exempt from TDS. Efforts will also be made to make these instruments more attractive to investors thus providing additional funds to an ailing industry struggling to raise capital.

Infrastructure

There is no doubt that improvement in infrastructure boosts growth of industry. Improved connectivity and accessibility is an advantage like no other and a big factor in home buying decisions. The Finance Minister announced a number of infrastructure investments. These included announcement of new phases of Metro in Bangalore and Chennai as well as in the Tier 2 cities of Kochi and Nagpur. The FM also announced two new technologies ‘MetroLite’ and ‘MetroNeo’ which will be deployed to provide metro rail systems at a much lower cost but with the same experience. The FM also proposed building 8,500-km of highways by March 2022.

In a separate but related announcement the FM also proposed the launch of a portal to collect relevant information about migrant workers who form the bulk of the pool of construction workers across the country. Collecting this information will enable better provision of health, food, housing and other schemes for migrant workers thus helping ensure a more reliable supply of labour.

In Conclusion…

Budget 2021 has not been the most favourable for the real estate sector which expected sops like relief for income tax which would put more money in the hands of households thus enabling them to buy homes or even input credit under GST for real estate projects. The realty sector is a major contributor to the country’s GDP with its many backward and forward linkages. Announcement of additional sops would have provided a boost to the sector and incremental benefits for the economy.

Indian Residential Market Grew 84% in Q4 2020: Knight Frank India

outh of Gurgaon – Reasons For Market’s Appeal As Residential Destination

The year 2020 will forever be known for the COVID-19 pandemic and the challenges it threw at us. However, 2020 will also be recognised as the year the Indian real estate industry showed a lot of resilience in the face of these challenges. A number of government-driven initiatives were certainly helpful in doing so. The H2 2020 India Real Estate report by Knight Frank India, a leading international property consultancy, highlights the increase in sales in the country’s main residential markets. Similarly, the office market also performed stunningly despite the initial period of inactivity following the imposition of lockdown measures.

Residential Market Performance

The 14th edition of Knight Frank India’s flagship half-yearly report provides insight into the residential and office market across 8 Indian cities. According to the report 95,000 residential units were sold in H2 2020 across the country’s top 8 cities. 61,593 units were sold in Q4 2020 as against 33,403 units during Q3 2020, thus recording 54% QoQ growth and achieving a recovery of almost 100% of pre-COVID levels. Almost 57% of the sale of homes in H2 2020 were made up by homes priced above Rs. 50 lakhs.

Residential Performance of MMR
Residential Performance of MMR (Source: Knight Frank India)

In the Mumbai Metropolitan Region (MMR), a number of factors contributed to this city’s residential market recording a growth of 10% YoY to 30,042 units in H2 2020. A reduction in Stamp Duty combined with the historic lows of interest rates on home loans as well as a host of discounts and offers propelled this surge. Demand fuelled by the festive season also helped fuel the rise in demand. An interesting observation has been the growth in demand for bigger homes driven by the fact that people now find themselves needing the additional space due to the changed dynamic of working from home.

Gulam Zia, Executive Director – Valuation & Advisory, Retail & Hospitality, Knight Frank India said, “The stamp duty cut has emerged as an undisputed win-win situation for all stakeholders. Homebuyers in the mid and higher income groups have made most of this lower stamp duty window with relatively expensive markets of MMR and luxury segments recording the highest jump in sales after the cut. We believe that this momentum is likely to continue till the lower stamp duty regime exists.”

Office Market Performance

According to this latest report the office market in the top eight cities recorded transactions of 22.2 mn sq ft in the July – December 2020 period. While there was temporary inactivity in Q2 due to the lockdown, as normalcy returned gross leasing revived to 31% of the quarterly average of 2019 in Q3 2020, eventually surging to a staggering 115% in Q4 2020. 

Performance of India Office Market
Performance of India Office Market

The office transactions in Q4 2020, across 8 Indian cities, grew by a massive 271% to 17.5 mn sq ft as against 4.7 mn sq ft in Q3 2020. Bengaluru, Hyderabad, Pune and Chennai contributed to this surge with transacted volumes of 459%, 640%, 919% and 227% respectively. Across H2 2020 Bengaluru saw a surge of 8% YoY to 7.5 mn sq. ft. in leasing activities.

On the other hand, while Mumbai’s residential market performed relatively well, its office market witnessed a very tepid year on the whole. This was expected as 2019 was an exceptionally good year which saw record high transactions of office leasing. However, despite a very slow year, H2 2020 saw business districts like BKC and off-BKC witness growth in leasing volumes of 32% YoY to 0.3 mn sq ft, while Central Mumbai, comprising Parel, Lower areas, Parel, Dadar, Prabhadevi witnessed growth of 24% YoY to 0.09 mn sq ft registered growth.

Rajani Sinha, Chief Economist and National Director Research, Knight Frank said “There has been a very strong resurgence in office demand in Q4 2020, despite most corporates adopting to Work From Home during the pandemic. Going forward, as things return to normalcy, corporates will experiment with hybrid work models. So even while they give more flexibility to the employees to work from anywhere, that will not result in lower office demand.”

Knight Frank Affordability Index
Knight Frank Affordability Index (Source: Knight Frank India)

Specific takeaways from the H2 2020 India Real Estate report by Knight Frank India:

  • The government’s various policy interventions helped revive the real estate sector. These initiatives include the cut in repo rates, extension of RERA timeline, one year extension for NBFC loans to commercial real estate projects in select cases, and more specifically the reduction in stamp duty in Maharashtra.
  • Across markets, in home sales, Mumbai and Pune lead the way with the highest volume of sales driven in large part due to the stamp duty cut in the state.
  • The mid and high-end segments performed much better as the perception of bigger homes grew. With more people working from home the appreciation for additional space has grown.
  • There has been a further correction in prices across most markets with Mumbai and Pune witnessing the biggest 4 year changes at -16% and -17%, respectively.
  • Home loan rates are at a multi-decade low while Knight Frank’s affordability index is at the best decadal level. 
  • In the office sector, there has been a resurgence in office demand despite remote working gaining prominence. Pre-commitment activity remains strong.
  • QoQ office transactions improved across markets with Bengaluru, Hyderabad, Pune and Chennai witnessing 459%, 640%, 919% and 227% growth, respectively.

Residential and Office Markets Stage Remarkable Recovery in Q3 2020: Knight Frank

Real Estate Growth

Home sales have increased 2.5 times in Q3 2020 compared to Q2 2020, while new launches have increased 4.5 times in Q3 2020 compared to the previous quarter reports Knight Frank India in its latest market update. The leading international property consultancy revealed this not unexpected good news during the launch of its special report – India Real Estate Update (July – September 2020). This timely report also reveals that India’s prime cities have registered an 80% growth in office leasing in Q3 2020.

Residential sales in Q3 2020. Source: Knight Frank
Residential sales in Q3 2020. Source: Knight Frank

It is almost surreal that we are now in the seventh month of the COVID-19 pandemic. There have been various phases of lockdown and then various phases of unlock. After the first couple of months of lockdown, as many people as well as migrant workers left for their home towns and villages, the economy was staring down the barrel. All construction work came to a grinding halt. But after the first stagnant quarter of the pandemic, real estate developers began to report renewed buyer interest in homes, no doubt stirred by the value of a home to wait out the COVID-19 storm. Many developers have also reported a steady pick up in sales which is clearly reflected in Knight Frank India’s latest market update.

Recovery of Residential Market

The period of July to September 2020 or Q3 has seen home sales volume jump to 33,403 units in Q3 2020 compared to just 9,632 in Q2 2020. Similarly, 31,106 new residential units were launched in Q3 2020 compared to 5,584 units in the previous quarter. Developers have displayed their innovativeness and marketing savvy by including various schemes and benefits such as easy payment options, etc. to attract homebuyers during the lockdown. A key ingredient of their success in attracting buyer interest has been various digital marketing platforms. Together, this helped residential sales improve to 54% of pre-COVID levels.

Impact of stamp duty reduction. Source: Knight Frank
Impact of stamp duty reduction. Source: Knight Frank

Stamp Duty Boosts Recovery in Maharashtra

In Maharashtra, the 300 basis point cut in stamp duty has been a big stimulus in boosting demand for residential units. In tandem with the reduction in home loan rates, Mumbai and Pune saw sales double in Q3 2020. Together, Mumbai, Bengaluru and NCR accounted for 56% of the quarterly sales volume during Q3 2020. Shishir Baijal, Chairman and Managing Director, Knight Frank India, said,

Developers have been focusing on liquidating inventory and homebuyers inclined to purchase ready assets have translated into reduced unsold inventory levels in this quarter. Going forward, the festival season will be crucial for developers. This may prove to be an opportune time for end-users with the adequate financial stability to make their investments.”

Increase in Office Transactions

The improvement in residential real estate is mirrored by the sector as well. Social distancing norms and work from home have largely made offices redundant for the time being. The brunt of this was felt in Q2 of 2020 which saw volumes of sales and new completion fall sharply. Business expansion plans were deferred as companies were forced to control costs in an uncertain environment. However, similar to residential, with the unlock commercial has also registered recovery. New completions grew to 126% to 0.33 mn sqm in Q3 2020 compared to Q2 2020. The recovery in office transactions and new completions helped rental values remain stable in Bengaluru (4%) followed by Hyderabad (2%), Chennai (0.5%), and Pune with 0% YoY.

Office transaction in Q3 2020: Source Knight Frank
Office transaction in Q3 2020: Source Knight Frank

As unlock progresses and the economy slowly stages a recovery, the office market is expected to improve. This is also reflected in the recent success of REITs, also seen as an indicator of investor confidence in this space. Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India said,

We expect occupiers to look at office space usage more strategically. This will lead to further innovation in aspects like social – distancing, health benefits, sustainability as well as preparedness for future contingencies.”

The recovery of the residential and office markets of the real estate industry augurs well for the overall economy. As the recovery gains steam during the upcoming festive season, one hopes the various other codependent sectors also gain from real estate.

Office Leasing Scales Historic Highs, Residential Sales Remain Stable: Knight Frank H2 Report

Trends in Bangalore Real Estate: Aerial shot of UB City, Bangalore

Given the latest growth forecasts for the Indian economy, one could be forgiven for feeling like every sector is struggling and experiencing a deceleration. The latest Knight Frank India Real Estate: H2 2019 report suggests that transactions in the Office space have experienced historic high whereas sales of homes have stayed resilient despite numerous sectoral and financial headwinds.

Pan-India Residential Market Remains Buoyant

Across India the residential fared surprisingly well. According to the Knight Frank report, YoY there were 23% growth in launches. Although there was a marginal 1% drop in sales in H2, overall sales grew by 1% during 2019. Even the QTS or Quarters to Sell improved to 8.9 in 2019 compared to 10.2 in 2018. The rigorous implementation of RERA and rationalisation of GST rates have served to keep customer sentiment buoyant. Whereas the setting up of an Alternative Investment Fund (AIF) aimed at providing developers with some financial relief towards unfinished and stressed projects has done much to help them align themselves to the new normal of India’s real estate sector. This can be seen from the increased volume of new launches.

Sector Performance Highlights:

  • Affordable housing has seen a small drop in share of transactions despite 60% residential launches happening in the affordable sector.
  • Weighted average prices in Mumbai, Pune and Chennai witnessed a drop by 2%, 3% and 5% YoY, respectively.
  • Moderating prices, government reforms and incentives have kept the residential market from stagnating.
Performance of MMR residential market. Source: Knight Frank report
Performance of MMR residential market. Source: Knight Frank report

Mixed year for Mumbai Residential Market

According to the report, in Mumbai launches decreased in H2, however for 2019 there was a steady 7% growth in launches thanks to a strong 22% in H1. Sales in H2 however were affected by the weak consumption demand led by the slowing economy and the lengthening shadows of the NBFC crisis which continue to present aftershocks. This has led to an annual decline of 5% in sales for 2019. The biggest highlight from a consumer perspective is the continued decline in prices in the MMR market. This shows a steady price correction to Rs. 7,014 per sq. ft. from a peak of Rs. 8,120 in 2016.

Sector Performance Highlights:

  • Average apartment sizes have shrunk by 25% over the last 5 years across the MMR market from 892 sq. ft. to 673.
  • 6% decline in launches in Mumbai during H2 – 35,988 compared to 43,822 in H1
  • Unsold inventory and QTS have increased over the last two years.
  • Thane market registered highest growth (36% YoY) of new launches 

Gulam Zia, Executive Director– Valuation & Advisory, Retail & Hospitality, Knight Frank India, said, “The residential sector in Mumbai was also impacted by the general slowdown as well as the continued effects of the credit crunch and NBFC crisis which has impacted end-user sentiments with sales declining by 14% YoY in H2 2019. We hope that the series of reforms that the government is undertaking would augur well for the revival of the economy as well as the real estate sector.”

Performance of Office Sector experiences all-time highs

Office leasing in 2019 touched a historic high of 60.6 msf thus recording a 27% YoY growth compared to 2018. This growth was witnessed despite the current economic slowdown. Bengaluru has seen the highest volume of office leasing in 2019 at 15.3 msf to top a decade of leading office leasing in the country. Hyderabad was not far behind at 12.8 msf.

Office leasing in 2019. Source: Knight Frank report
Office leasing in 2019. Source: Knight Frank report

While leasing by IT sector increased in H2 2019 the share of BSFI leasing reduced to 16% thus revealing the direct impact of the of the NBFC crisis. Meanwhile leasing by coworking businesses accounted for 12% of the total space at 4.1 msf in the same period, reveals the Knight Frank report.

Mumbai witnessed a historic year of leasing activity in 2019 touching 9.7 million sq. ft. and thus registering a 22% YoY growth. New supply of office space, however, declined by 18% YoY.

Shishir Baijal, Chairman and Managing Director, Knight Frank India tempered this high with sobering views, “The historic rise in the office transactions is a significant growth indicator for the office market as it represents the continued commitment of domestic and global corporations in the country’s growth potential despite the ongoing economic slowdown. While the office space is expected to sustain demand, increasing supply could weigh on rents and vacancy levels.”

Mega Online Home Fest by Provident Housing

Provident Mega Online Home Fest
Provident Mega Online Home Fest
Provident Mega Online Home Fest

Provident Housing announces the biggest festival of this season, Mega Online Home Fest! The fest offers savings up to Rs.12,00,000 lacs* on premium homes and 1 lac* instant additional cashback (over and above the offer price) on the purchase of an early-bird voucher worth Rs.999 (100% refundable if not used) before 16th October 2019.

You can arrive at this fest as per your convenience as it is a full-fledged ONLINE HOME FEST giving you a chance to own a Provident Home, in just a click. To make your festive season bigger and brighter, Provident Housing has handpicked the projects at the most in-demand micro-markets and have offered savings up to Rs.12,00,000 on these homes.

The offer price will be revealed on 18th October 2019 @00:00 hours on their website (hyper link this). To avail the voucher benefit, you must select and book an apartment online through their online home booking platform, BOOK MY HOME between 18th October 00:00 to 20th 0ctober 23:59 hours. The offer is valid for some specially chosen projects across Bengaluru, Chennai, Coimbatore, Goa and Hyderabad.

Here is how you can book your dream home

Step 1- Go to www.providenthousing.com/megaonlinehomefest and click on the project of your choice.

Step 2- Click on BOOK MY HOME to take a virtual tour of the property.

Step 3- Select your preferred apartment from the available selection.

Step 4- Book your home by making an online payment of just Rs. 2,00,000. Don’t forget to apply your voucher code at the time of booking to get an instant additional cashback of Rs. 1,00,000.

What are you waiting for? Get your own little place to celebrate, a place with new beginnings, a place made of love and dreams. This year, BRING DIWALI HOME!

Choose your project today!

How North Bengaluru has Emerged as the City’s Crown Jewel

Bengaluru’s emergence as an outsourcing hub gave birth to IT clusters in the city, and earned it the sobriquet ‘Silicon Valley of India’. Until the mid-2000s, these were located in the central, southern and the eastern parts of the city which also enjoyed well-rounded development in terms of infrastructure as well as civic and social amenities. However, the development of the Kempegowda International Airport in Devanahalli in 2008 catalysed the growth of North Bengaluru. It attracted large scale realty investments and still continues to do so.

North Bengaluru comprises of the localities of Hebbal, Jakkur, Thanisandra, Hennur, Banaswadi, Yelahanka and Devanahalli. Development of the entire region is accelerating at an exponential rate. Here’s a look into the factors contributing to the development of North Bengaluru.

Public Infrastructure in North Bengaluru

If we look at the public infrastructure that is currently in place and under construction in North Bengaluru, we would be able to imagine the scale at which the region is growing. A 22-km Elevated Expressway to the International airport has reduced the travel time to and from the airport for the entire city.

Under Phase 3 of the development of Namma Metro, a line from Nagawara to the International Airport via Hebbal and Jakkur, spanning a total of 30 km, has been sanctioned. The project has been fast-tracked and is estimated to be completed by December 2023. Its completion would enable residents of North Bengaluru to seamlessly travel to the airport or to the city.

The proposed Peripheral Ring Road (PRR) is envisioned to be a 65-km stretch of Ring Road which will encircle the Outer Ring Road (ORR) and connect Doddaballapur Road, Bellary Road, Tumkur Road, Hennur Road, Sarjapur Road and many others, including Electronic City. The PRR will largely decongest the ORR and provide faster connectivity around the city.

Finally, the government of Karnataka is contemplating developing a suburban railway network connecting the city of Bangalore to the International Airport. The plan is to convert Devanahalli into a terminal station of the suburban line which would further connect Bangalore City Railway Station to the airport via KR Puram and Hebbal Railway Station. This is a bold plan and would provide airport-to-railway connectivity thus boosting tourism as well as unprecedented multi-modal connectivity in the city.

Peripheral Business District

North Bengaluru is developing into a massive business hub. The $22 billion, 12000-acre KIADB Devanahalli IT Park is one of the most awaited developments here. This is in addition to the already-functional KIADB Aerospace SEZ, a science park and a 10 billion dollar financial city which would rival the financial hubs of Gujarat and Maharashtra, and further attract a lot of growth and employment opportunities. Manyata Tech Park and Kirloskar IT Park are among some of the IT parks that have come up in the region. A 2018 Knight Frank report observes that office transactions (sq. ft.) in the region have seen a 73% YoY growth; this is estimated to increase further.

Cheaper Land Rates Contributing to the Real Estate Boom

North Bengaluru has benefitted from traditionally cheaper land rates which has enhanced its attractiveness to developers and investors. Despite the recent flurry of development, and improved infrastructure and connectivity, the rates continue to be lower than other parts of the city. This has consequently resulted in a booming residential market with more affordable housing options for the masses choosing to settle in Bengaluru. Estimates of prices per sq. ft. for apartments in North Bengaluru – Hebbal (Rs. 5000-10000), Hennur (Rs. 3500-7500), Yelahanka (Rs. 4000-6500) and Thanisandra (Rs. 3000-8000).

Vast Array of Options

A homebuyer looking for a new abode in North Bengaluru has the flexibility to choose from a variety of options curated to suit their lifestyle needs. Apartments of varying configurations, townships boasting vast green spaces with digitally enabled homes or green homes, villas, and plotted developments are some of the dizzying array of choices that real-estate developers offer the discerning homebuyer or investor. North Bengaluru is emerging as the destination of choice to live a well connected, urban life with the luxury of abundant green spaces.

Proximity to the best of Social Infrastructure

The burgeoning growth of North Bengaluru as a commercial and business hub has ensured the growth of a reliable and good quality network of social amenities such as schools (Stonehill International School, Canadian International School, Delhi Public School, Sir M Visveswaraya Institute of Technology, etc), hospitals (Columbia Asia, Cloud Nine, Regal Hospital, NRV Hospital, Aster CMI Hospital, etc), malls and entertainment options (RMZ Galleria, Decathlon etc).

Despite the tremendous construction and development in North Bengaluru in recent years, the region continues to have an abundance of vast, open spaces. The existence of Nandi Hills and lots of greenery also adds to the attraction of this region.

Conclusion

North Bengaluru is the latest shining jewel in the crown that is the city of Bengaluru. Investors and residents alike can expect much from this region in the coming decade. The completion of public infrastructure projects such as Metro connectivity till the airport, Peripheral Ring Road, the establishment of Business districts, SEZ’s, and IT clusters will completely transform the landscape, economy and real estate potential of the region.

(Previously published in The Hindu’s Property Plus supplement on 28th Sept)