Real estate market & home loans outlook for 2021?
The real estate market is facing continuous setbacks due to some other reasons. Firstly the demonetization in 2017 affected the real estate market hard. The markets got crashed hard due to a sudden ban over Rs.500 & Rs.1000 notes as many of the transactions in real estate used to happen in cash in India. Post to that, the Coronavirus pandemic affected the markets as in the year 2020, the construction industry was at a halt of construction, which was later opened up. Massive job losses and halt of the trading & restaurants business also brought a setback to the sector. Then the second wave came in the year 2021 in the month starting March. Thus there are continuous ups & downs in the real estate sector. But in the year 2021, the market scenario is changing as compared to the year 2020. The Real estate sector is permitted to operate the business, and the construction activity is not affected. Also, the markets are improving. There is a growth seen in the IT sector, ITES, manufacturing output is increasing, and the government employees are least affected due to the ongoing pandemic.
Thus the markets are showing growth in various sectors, which has lead to high demand in the sector. Due to some sectors which are performing well, the people are getting double-digit increment and also the market sentiments are positive. Thus the growth is seen in the real estate sector. The stock market has crossed more than 50,000 points, and thus the market sentiment is high due to the rise in the foreign portfolio investments [FPI] in the stock markets. Thus, the heavy investors in the stocks or equity-based mutual funds can sell their shares/mutual fund units at a higher price and thus can invest the funds into the real estate sector. The work from home in most companies is giving positive results, and thus people can work from the convenience of the home and thus can even stay in smaller cities and work. Thus the demand for housing is even growing in tier II & tier III cities. The home loans market is directly dependent on real estate sales. Thus, due to the rise in salaries, the demand for home loans increases as people increasingly invest in real estate markets.
Following are the features of the real estate markets:
The rise in construction cost:
The construction material prices have increased rapidly due to the rise in inflation and fuel costs. The overall rise in commodity prices has lead to an increase in the cost of construction, and thus, the operational cost of the real estate developers has increased. Also, due to the Covid situation, there is a shortfall of labor in urban areas as most people have shifted to the rural areas, and thus, the labor cost has also increased due to a shortage of labor.
Reduction in stamp duty:
To boost the real estate markets, many state governments have reduced the stamp duty charges, and thus, there is a large increase in the registration of properties. Thus the real estate market is improving.
Interest rates on banks at record low:
The interest rates charged by the banks are as low as 6.50% per annum, which is the lowest interest rate being charged by the banks. Thus due to falling interest rates, it is becoming very affordable for the public to avail loans from the banks or NBFC’s. Thus there is an overall rise in the disbursement of loans by the banks. Thus the home loans market outlook is also positive in the year 2021.
Thus the real estate market is seen with a positive trend the markets. The real estate markets are growing due to various steps taken by governments like reduction in stamp duty & also reduction in the interest rates from the banks. Thus the ailing real estate sector is slowly & steadily recovering from the downward trend. There is a steep rise in the registration of properties, mostly in metros, and also, the demand for luxury housing is showing a positive trend.