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India realty offers safe-haven investments

The growth of this sector is well complemented by the growth in the corporate environment, and the demand for office space as well as urban and semi-urban accommodations.

 The Indian real estate market is cer­tainly showing trends of good invest­ment opportunity as the sector pulls out of Covid-19 impact. The sales of both residences and offices are pick­ing up as Indian government adapts measures to support the property sector. The UAE NRIs have been actively monitoring trends as realty offers safe-haven status for both long-term and short-term investments.

Dr Niranjan Hiranandani, President at Nared­co, said, "'A home, back home', for an expatriate Indian, is more than just a sentimental decision; in the global economic scenario, it is also a prudent investment decision. The Indian economy, like others globally, has borne the impact of Covid-19 pandemic induced lockdowns; and as it recovers, Indian real estate offers a 'never before - never again' situation for global Indians. Indian develop­ers are offering 'buy to rent' options for expatriate Indians, as also attractive payment schemes, these make it too good an option to miss out. Price-points will never be as attractive as they are now; stamp duty concessions in states like Maharashtra make it even more of a win-win scenario. The global currency valuation vis-a-vis the Indian Ru­pee adds to the advantage for expatriate Indians."

The regulatory regime post implementation of Real Estate Regulatory Agency (Rera) has en­hanced transparency and safety for investors and home buyers; and as the Indian economy posts improvement over the past few months, the dead­line to take maximum advantage while buying Indian property is fast slipping away, informs Hi­ranandani.

He added,"Domestic home buying in the last four months of 2020 has been better than the previous year (not just better than what it was dur­ing the lockdown), and property sales in markets like Mumbai and the Mumbai Metropolitan Re­gion (MMR), like others across the country, are consistently rising. It is a situation where the 'good times' may reduce in terms of overall advantages, and it makes sense for expatriate Indians to make the most of the situation - and soon!"

The Knight Frank India, recently launched the 14th edition of its flagship half-yearly report - India Real Estate: H2 2020, which presents a comprehensive analysis of the office and residen­tial market performance across eight major cities for the July to December 2020 (H2 2020) period.

The report highlights that homes sales in Mum­bai Metropolitan Region (MMR) saw a significant growth of 10 per cent year-on-year (YoY) to 30,042 units in H2 2020 propelled by the stamp duty cut. Sales picked up from September 2020 onwards and grew stronger towards the end of the year. Sales in Q4 2020 jumped a whopping 80 per cent YoY.

Gulam Zia, executive director - valuation and advisory, retail and hospitality, Knight Frank In­dia, said, "The stamp duty cut has emerged as an undisputed win-win situation for all stakeholders. Despite the uncertainty about their income streams, the homebuyers were able to make their decision to purchase, developers were rescued from the carnage of the pandemic and the state government collected more revenues than what they would have otherwise managed. 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 highest jump in sales after the cut. The registrations offices in Mumbai had wit­nessed a beeline of people wanting to close their deals before the first window of lower stamp duty of December 2020. We believe that this momen­tum is likely to continue till the lower stamp duty regime exists."

Apart from stamp duty reduction plethora of other factors aided sales growth in H2 2020 such as - reduction of interest rates to historic lows, demand for upgrading to larger homes, festive period of Navratri-Dussehra-Diwali, developers

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offering host of direct/indirect discounts and in­crease in household savings during the lockdown. The number of home launches fell by 25 per cent YoY to 26,904 units during the second half of the year (H2 2020) but registering 121 per cent QoQ to 18,515 units in Q4 2020. The region also ex­perienced a marginal correction in weighted aver­age prices, approximately -3.2 per cent YoY in 2020 to INR6,787 per sq ft.

"Slashed stamp duty and registration rates, flex­ible payment plans and correction in property prices have fuelled investments in ready-to-move apartments where good rental yields and capital appreciation are a given even in the current tur­bulent times. Commercial spaces like Grade A offices, IT Parks, logistics centres and REITs also present a profitable, sustainable investment alter­native, promising average rental yields to the tune of 6-10 per cent," said Tanuj Shori, Founder and CEO, Square Yards.

"A good confluence of favourable currency rates and lowest-ever home loan prices have set the ball rolling for NRI investments in Indian real estate market. With personal finances hit, NRIs can now opt for mortgage refinance in India if the difference between the rate of interest they are paying and the one available now is more than 50 bps or 0.50 per cent. NRIs not present in In­dia can give power of attorney to a person resid­ing in India in a bank-acceptable format. Since interest rates are on a downswing, NRIs should opt for variable rate linked to RBI repo rate as there is a possibility of further rate cuts. Variable interest rates are cheaper and NRIs would not have to pay penalty for prepayment on variable rate loans. With the economy bottoming out, it is an opportune time for NRIs to park their mon­ey in real estate," added Shori.

The state government's decision to reduce stamp duty cut has boosted homebuyer sentiments which led to a massive increase in home sales of 193 per cent quarter-on-quarter (QoQ) and 147 per cent of the 2019 quarterly average during Q4 2020. The region registered 22,407 units in Q4 2020 against 7,635 units in Q3, 2020. 57 per cent of home sold in MMR during H2 2020, were in the above Rs5 million (INR 50 lakh) ticket size against 52 per cent in H2 2019 due to demand for upgrad­ing to larger apartments shaped during the lock­down. As the absolute savings from stamp duty reduction is higher in high ticket size segments, homebuyers in the mid and higher income seg­ments have made most of this lower stamp duty window. The relatively expensive micro-markets of MMR such as South Mumbai (342 per cent YoY), Western Suburbs (246 per cent YoY) and Central Mumbai (186 per cent YoY) experienced highest sales growth in Q4.

Manju Yagnik, vice-chairperson, Nahar Group and senior vice-president, Naredco, Maharashtra West, said: "The 50 per cent reduction in con­struction premiums was a long pending demand, and it has come at a very right time and will sure­ly give a further boost to Mumbai's real estate industry. However, a one-year window will be an additional burden for developers for whom liquid­ity is still a matter of concern. Today, a city devel­oper has to pay 22 different premiums at different stages of construction under various heads - in­cluding open spaces, FSI, staircases, lift well, lob­bies, etc., which add up to 35-38 per cent of any project cost. The industry is already facing major liquidity issues, and the benefit of reduced premi­ums will be only on the permissions availed till the end of the timeline."

Yagnik opines, reduction in the construction pre­miums makes Mumbai market the best place when it comes to investment by NRIs with additional ben­efits of lowered stamp duty and ready reckoner rates along with the lowest bank interest rates.

"NRIs should take this benefit of premium cut and invest in new projects to be launched offering 1, 2 and 3 BHKs convenient luxury homes in ex­tended suburbs in the integrated township that offer holistic living, accessibility, with locational advantages in terms of shopping, entertainment hubs, and educational institutions, medical and healthcare facilities, along with good ROI."

The office completions in Mumbai Metropolitan Region (MMR) recorded at 1.7 million sq ft in H2 2020, the office leasing transaction was at 2.1 million sq ft during the same period. The weight­ed average transacted rentals witnessed a decline of 5.6 per cent YoY in H2 2020. The office trans­actions witnessed a marginal recovery in Q4 2020; the transactions jumped 8 per cent QoQ to 1.1 million sq ft and managed to reach 46 per cent of 2019 quarterly average.

Business districts such as BKC and off-BKC and Central Mumbai witnessed a sharp growth in of­fice leasing in H2 2020 of 32 per cent YoY and 24 per cent YoY, respectively. In terms of occu­pier profile, manufacturing sector garnered the highest share of transactions during H2 2020 at 25 per cent, followed by BFSI at 23 per cent. Co-working operators continue to take up space ac­tively, and their share in overall transactions more than doubled from 7 per cent during H2 2019 to 18 per cent during H2 2020.

"The MMR has been amongst the worst af­fected cities due to the Covid-19 pandemic. The resultant lockdown was amongst the longest and most stringent compared to other top cities. The year 2019 had been a historic year for MMR office market with transactions touching a record high on the back of large pre-commitment deals. In 2020, there was an expected downfall in the leas­ing as large pre-commitment deals in MMR office market are rare, unlike those witnessed in low vacancy markets like Hyderabad, Pune, or Ben­galuru. The office leasing in 2020 was also im­pacted on account of restrictions on permitted office space utilisation and access to local trains in the wake of Covid-19 activity curbs placed by the Maharashtra government. Having said that, the occupiers with long-term view and better busi­ness prospects using this opportunity to scout for favourable deals. We expect that once restrictions on access to local trains and office space utilisation are removed, office demand will start to recover," added Zia.

RESIDENTIAL MARKET HIGHLIGHTS OF MMR

The Mumbai Metropolitan Region (MMR) was among India's worst-affected cities by the Covid-19 pandemic.

State Government stepped in at the right time with the announcement of reduction in stamp duty from five to seven per cent to two to four per cent across various MMR regions effective for a period of 7 months from September 2020.

As the absolute savings from stamp duty cut is higher in the higher ticket size segments, the relatively expensive markets of MMR and luxury segments languishing for the past few years witnessed a jump in sales.

The residential launches in Q4 2020 reached 93 per cent of 2019 quarterly average but were still down 25 per cent YoY to 26,905 units in H2 2020. The launches were down 37 per cent YoY at 50,303 units in 2020. Unsold inventory increased by one per cent YoY as launches were higher than sales in 2020.

Source: Knight Frank Research

 - sandhya@khaleejtimes.com