COVID-19 did impact residential real estate sales although recovery took place strongly after the first coronavirus wave. This was backed by cuts in stamp duty courtesy several State Governments, historically low rates of interest, discounts from developers and an overwhelming desire to live in one’s own house during the pandemic. The second wave led to activity coming to a stop in this sector although big listed developers are already seeing strong demand, raising prices for specific properties as per reports. DLF is reportedly mulling a hike of 5% in prices of select residential properties while prices have been raised by 2-3% recently courtesy of other established players like Brigade, Sunteck and Puravankara.
The Greater Noida and Noida authorities have recently proposed a hike in circle rates. The proposal may lead to circle rates going up by a whopping 40% in Noida, Greater Noida and areas along the Yamuna Expressway. A surcharge of 5-12.5% may apply for properties near the Expressway or along the Metro route. Sentiments are impacted by any increases in circle rates since it indicates a rise in land prices in the future.
Should home buyers be fast-tracking home purchases at this juncture? Property prices have mainly increased due to an increase in construction costs and disruption in raw material supplies. A price hike of 5-10% was anyway coming with inflation in construction material prices and labor costs. The operating costs have increased in recent times, particularly on account of safety protocols for workers and other pandemic-linked support measures. With margins at wafer-thin levels, realty developers are already facing delays in projects, input cost increases and reducing capabilities of paying back loans. With buyers turning into fence-sitters over the previous quarter, liquidity sources are turning dry as per Hitesh Singla, Co-Founder & Chief Investment Officer, Square Yards. Financial constraints of developers have doubled according to Singla and chances of earning profits are bleak at the moment. This may have prompted some developers to hike their prices according to him.
Price rise is not a universal phenomenon in the sector at the moment. Listed and big developers have witnessed solid demand in comparison to smaller players. They are hence able to increase property prices while homebuyers are aligning with market players with stronger track records even prior to the coronavirus pandemic. These listed players have posted healthy sales volumes and collections in recent times in spite of liquidity concerns and unfavorable dynamics of demand and supply. GST and RERA have already backed these bigger players and ample liquidity and stronger balance sheets after COVID-19 are helping them cope better than smaller entities. Reports also indicate how the top-10 listed developers witnessed year-on-year growth of 61% in Q3 FY21 while the overall market stayed 24% lower than pre-COVID-19 levels for this period. Buyers may have to pay more for reputed developers and projects although they have always commanded more than smaller entities. There will not be any sudden jump in country-wide real estate prices however as per industry experts.
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Published Date: Aug 09, 2021
