The real estate sector is reviving, and realtors across India are breathing a sigh of relief. Realty has witnessed a surge in business in July-September and will continue this trend in 2021 reveals a leading real estate consultancy firm. With a reduced home loan interest and 1% GST on affordable housing, the industry has returned to the pre-Covid level. There has been a positive outlook for major metro cities such as Kolkata, Pune, Chennai, Mumbai, and NCR that have witnessed an average of 75.8% rise in residential real estate sales this quarter. However, the average price has gone down. When it comes to the commercial and office space segment, cities have witnessed a 51% jump.
Reason for Upsurge in Real Estate Sales
The spike in real estate has been due to developers actively enticing customers through digital mediums. Shikhar Mota, a CRM expert in the real estate industry, says that property sales have already started going digital. Marketing tools are helping to reach a broader audience amidst the pandemic. Initiating a residential real estate sale in 2021 would largely depend on how seamless the digital onboarding experience is.
Commenting on sales closures, he said, “there are many things that we consider before buying a property. Having a view of the project physically is hugely on top of the customer’s mind. The real estate industry’s behavior has been extremely volatile in the past few years. Most developers have lost their credibility in the market. Hence, buying a property 100% digitally is currently doubtful. Our international customers also ensure a site visit of the project through someone known before making the purchase.” He further added that realtors could expect the onboarding process to turn digital-only if the industry is more streamlined and process-oriented. Till then, digital can only be used as a marketing tool.
Quarterly Report Card 2020
However, it is seen that despite the pandemic, the absorption rate has drastically increased. Metro cities such as Pune, Mumbai, NCR, Chennai, and Kolkata have recorded YoY sales this quarter of 60%, 50%, 57%, 73%, respectively. Kolkata home sales have jumped to a whopping 139%, with a sale of 3921 residential units in the 3rd quarter alone and a 62% jump in office space deals. There has been a positive absorption rate. In real estate, absorption is the rate at which existing properties in the market are sold over a specific period. Mathematically, it is represented as:
The number of properties sold at a particular time/ the total number of properties available in the market at that point.
The figures validated by the leading real estate developers account for the revival and positive outlook on residential real estate for 2021. With the festive season approaching, the days to come will be even more crucial for builders.
Increasing Demand for Ready-To-Move-In (RTMI) Properties
An interesting development in the purchasing pattern of consumers has been the rising affinity towards RTMI properties. Sudhir Shetty, AVP Residential Sales, Prestige Group, admits an upsurge in the residential real estate sales since August-September from customers and channel partners starting from site visits to the booking of properties. The RTMI segment has shown a promising market demand of 30-40%. He also mentioned that one of their luxury projects sold more RTMI units in the last three months alone compared to last year.
An all-time low home loan rates and no GST has encouraged customers to speed up their decision making. Additionally, builders are expanding their discount umbrella by offering lucrative discount options and additional benefits such as hassle-free loan processes, flexible EMI options, and other deals.
The Builder and Customer Mindset
From the Customer Standpoint:
The pandemic has magnified the importance of a house. A house is no longer just a residential “home” but serves as an office/school to cater to “work from home” and “online classes.” Builders are not wasting the opportunity and offering flexible payment options/discounts on their properties. On the other hand, customers are happy to avail huge discounts.
Shrihari Pathak, MD, Pathak Developers, Mysuru, said, “Customers, especially in the age bracket of 25-35 years, have got into a fast-track mode as they have realized there is a lot of momentum on losing out on inventory. Hence, the overall decision making has become faster.”
“The demand for residential units anyway existed, but the uncertainty brought by Covid-19 has actually accelerated the need and importance for owned homes to a generation that was tilting towards renting over buying.” Adds Chaitanya Seth, Partner, Business Consulting – Real estate sector, EY India
From the Builder Standpoint:
Builders, on the other hand, are not sitting on the inventory. Sales prospecting has become more aggressive. Most builders are looking to improve their overall customer onboarding experience. The quality of leads and inquiries have improved as prospects with a definite purchasing intent and timeline are approaching realtors while the number of casual inquiries has reduced.
As per Chaitanya, “Some developers are already in excess of 65% of their pre-COVID sales levels. The conversion rate across the buying cycle has also nearly doubled for a few. The coming quarter will be a great buying opportunity for fence-sitters and quick decision-makers. Developers are likely to see strong and swift momentum in decision making from these segments. The preference of home buyers today is more towards Ready-to-move-in (RTMI) properties or for a trusted brand with a strong value proposition.”
Have Site-Visits Reduced or Increased?
In the initial part of the quarter, the number of site visits had reduced due to the pandemic. People relied on virtual modes of communicating and interacting with the builders, especially customers residing out of the station. However, virtual site visits, pictures, videos, and walkthroughs are just a precursor. One needs a physical site visit for sale to happen. Sudhir Shetty, AVP Residential Sales, Prestige, said, “The weekends are often jam-packed with continuous site visits lined up.”
Chaitanya’s view of on-site visits is that they continue to remain an essential part of the sales cycle, especially for first-time buyers. He said, “While site visits remain critical in a high-transaction-value customer journey, buyers have been relying on digital mediums extensively for researching, shortlisting, and engaging with developers. In response, developers have adopted well to shape up their digital presence and eminence through websites, virtual tours, and digital marketing. Investing in digital platforms is key for developers to scale, engage, and maximize reach to the customers and channel partners.”
From a Commercial Standpoint:
RBI‘s announcement to justify the risk weightage on home loans and to link housing loan risks only to loan-to-value (LTV) has encouraged banks to offer more to the borrowers. With the onset of the pandemic, banks have been reluctant to provide loans while borrowers face financial stress.
Considering this, the RBI has decided to keep the repo rate unchanged in its October policy review. It could have provided an added boost right before the festive season. However, with an increase in consumer inflation and reduced repo rates from 140 basis points in 2020, it seems unlikely.
There have been initiatives to back-up realtors by reducing stamp duty charges (In Maharashtra) and providing builders’ discounts and freebies. This is likely to encourage customers and boost residential real estate sales and build a strong future outlook for Q4 of 2020 and 2021.
[Also Read: Residential Real Estate Sales Strategy for 2021]
A Condensed Version of What Lies Ahead in 2021
The outlook on Q4 and 2021 for the Indian residential real estate industry is slowly and steadily reviving. From a realtor standpoint, customer experience is something that has to be made seamless. This is the time to build trust and brand image. Investing in the right set of automation tools will help establish an exclusive and personal touch with customers. One needs to provide complete transparency of information to the customers at every corner to make their onboarding experience smooth. Historically, the North, South, and East regions of our country have started seeing some trajectory; however, the near-term outlook on sales for Q4 of 2020 and 2021 will continue to depend on the economy and environment’s recovery velocity.
Having worked with top realtors like Shapoorji Pallonji, Rohan Builders, Alliance Group, MGH Builders, Adarsh Group, Vaishnavi Group, and more, we have compiled the industry best practices and learnings into a real estate sales E-Book. The takeaways from the Ebook are as follows:
- How to increase agent productivity & boost digital sales?
- Capturing & tracking inquiries, and personalize communication-based on interest
- Managing multiple opportunities to ensure visibility into the pipeline
- Industry drift towards Zoom, Whatsapp, and other online modes of communication
- Residential and commercial real estate outlook 2021
- Insights from Industry experts