Diwali came early for prospective homebuyers this festive season. Record-low interest rates, affordable housing and attractive offers are making it hard for buyers to look the other way. India’s realty sector performed remarkably well despite the pandemic and is well on its way up.
According to Deepak Parekh, Chairman, HDFC, the levels of interest shown across the board by buyers has never been witnessed before, at least not in the last 50 years, as per the HDFC Head. “Right now, there is a lot of optimism in the air on the potential of the housing and real estate sector. This isn’t just feel-good talk, it is real. The Indian real estate market is on the cusp of a new growth cycle and it is important that we make the best of it,” he stated.
The pandemic threw a curveball that really shook things up overnight. People found themselves confined within the four walls of their homes. Homes suddenly became multi-purpose spaces and many found the restrictive confines unsupportive of the new lifestyle that was staring at them. This drove up the demand for premium housing in many cities.
In fact, a large share of units sold belong to the premium category. The availability of affordable home loans at low rates pushed homebuyers to close on deals at record speeds. This trend is expected to continue well into the post-Diwali period and bodes well for the future of the industry. However, as it is with all things in life, it is best to tread with caution.
Parekh cautioned developers, advising them to avoid over-leveraging and instead focus on execution. “The most fatal financial mistakes always happen in good times, simply because as I never tire of saying, leverage is a double-edged sword. Leverage amplifies profits in good times, but it kills during a downturn,” he explained.
Given the soaring demand for affordable, premium housing, developers are expected to continue launching new projects well into the new year. Indian developers can learn from the failings of Chinese property giant, Evergrande. The Chinese developer’s fall from grace came with a hefty price tag – USD 305 million of debt, to be exact. Meeting the needs of various income groups by ensuring supply at the right price points will be crucial for the realty sector if it wants to stay in the present course.