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The residential construction sector in India is growing rapidly due to urbanization and growing population in the country. Despite the COVID-19 headwinds, the residential sector recorded strong growth in Q3 and Q4 2020, as sales of homes increased across major cities. In July-September 2020, housing sales improved by a robust 86% on a quarterly basis.
The sales improved owing to low interest rates as RBI significantly reduced the repo rate by as much as 140 basis points, drop in stamp duty and property registration fee in a few states, incentives and attractive payment schemes provided by developers . In November 2020, Maharashtra recorded the highest number of residential registrations in almost a decade.
Due to 60% decline in stamp duty by the Maharashtra Government, residential properties registration in Mumbai grew over two-fold in December 2020. Also, the work from home concept further improved the demand for residential properties. A six-month moratorium was offered on EMIs on all loans, including home purchases, which further had a positive impact on residential market in the country .
Going forward, Tier 2 and Tier 3 cities are likely to witness greater demand for houses. Affordable housing to record robust demand and ready homes are expected to be preferred by customers. Among various segments, mid-tier and affordable housing categories home buyers are likely to perform better.
Mahindra Lifespace announced launch of 1,000 flats in Pune in February 2021 with planned investments of ?500 crores in the housing project. The phase one of the project is expected to be launched in the coming months and is expected to be concluded by 2025.
Moreover, owing to the pandemic, digital mediums are being embraced by customers. There has been a substantial growth in virtual property events, digital launches, online listing and viewing, data analytics, as well as cloud-based services.
Furthermore, demand for large, secure, open, hygienic and green homes is expected to increase as buyers prefer healthy lifestyle especially in a post COVID era.
Under the Pradhan Mantri Awas Yojana (PMAY-U) 2021, the government approved the construction of 56,368 new houses. The PMAY-U was launched in 2015 by the Prime Minister of India with an aim to provide housing for all by 2022. The government targets to build 1.12 crore houses in urban areas during 2015-2022 period. As of February 2021, around 73 lakh houses have been grounded and around 43 Lakh have been concluded as part of this scheme.
Contractors couldn’t service their loans which led to banks to writing off the debts resulting in bad loans. This resulted in stalled projects due to economic slowdown and a credit crisis in the country. To clear out these debts, the government introduced the special Window for Completion of Construction of Affordable and Mid-Income Housing Projects (SWAMIH) fund of $3.5 billion (INR250 billion).
The SWAMIH fund is financed by the government (50%), SBI & LIC (10% each), and the remaining is funded by other public and private-sector players. The fund is likely to deliver its first finished apartments in 2021. In the financial year beginning April 1st 2021, the fund will hand over 4,000+ homes or 16 projects.
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