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It has been more than two years since the COVID -19 pandemic fear has engulfed the entire world, causing havoc on the global economy. By the time people began to accept COVID-19 related problems as the new normal, Russia invasion of Ukraine in February 2022, had once more driven the world economy to a considerably worst state than it had been during the epidemic. The ongoing war has totally disrupted the supply chain system, stifling the flow of goods, fueling cost increases and product shortages, and causing severe food shortages around the world. The slowing down of global economy due to the high inflationary pressure and impact of the pandemic and Ukraine war and loss of business opportunities due to supply chain disruptions, have all dragged down GDP growth in even developed countries to levels lower than India’s.
Major challenges confronting the Indian economic are (1) poverty and unemployment eradication (2) education and health care provisions and (3) rural upliftment. Apart from the major challenges, the current economic issues caused by rising inflation, supply chain disruptions, geopolitical tensions and effects of unpredictable natural calamities caused by the global warming scenario are all having a negative impact on the growth path.
The strong economic fundamentals of the Indian economy combined with timely intervention and supportive measure from the GOI, in synchronization with the RBI’s inflationary control measures, have had a balancing effect in keeping the Indian economy relatively stable during these difficult times. Experts opinioned that India will continue to drive the global economy, with a GDP growth rate between 6-7% in the current FY and likely to maintain the tempo in the next year as well.
Understanding Indian trend
Growing at an estimated rate of about 22% per annum, the RE sector, that continues to be the second largest employment generating sector, has been contributing about 6-7% to India’s GDP.
According to various reports by eminent real estate consultants, the Indian residential sector has clear and definite future growth prospects. Even during the pandemic-imposed lockdown periods, the market saw a surge in inquiries, many of which were later realised as a result of developers' sensible sales strategies and the various incentive measures, implemented by the different State Governments to boost their respective RE sectors.
Despite a significant increase in input costs and an increase in interest rates as a result of RBI monetary policies, the demand trend for the residential segment remains positive. This trend will continue as potential investors rush to make a decision, aware that the global inflation trend will lead to further increases in the cost of investment if they 'wait and watch.'
The pandemic scenario enlightened the need and importance of having an own house and for that matter, the end-users continue to be the main takers of the residential segment. The continuing need for home ownership is not only strengthening the market, but also encouraging several new players to enter this space.
As an alternative finance option, and also to enable the investors to take benefit of the limited period incentives offered by the Government, the developers are also keen on releasing the unsold inventories at a negotiated rate, to the genuine buyers. This has also contributed to the sales growth of residential units across the country even during the recent tough times.
The realty market is witnessing more transparency and speedy completion of projects as a result of the enactment of RERA across the country, since 2016. Potential customers have the added advantage of thoroughly screening the entire details of a developer and the project under his consideration through the RERA portal, and to take a prudent decision.
Apart from the above, the Ministry of Housing & Urban Affairs is setting up a committee to assess various aspects of several stalled housing projects across the country, that were launched before the enactment of RERA. The committee will provide needful resolution and the future course of action required, to ensure that the homebuyers will get delivery of their homes in the stalled projects. This initiative will help to clear up the stalled projects and thereby give more confidence to the new investors to enter the market.
Value additions in the new normal
To copy with pandemic situations and the new normal, expectations about the project's add-on amenities and the space requirements of each residential unit are suddenly changing. Within the residential building complexes, new projects should consider providing access to facilities such as healthcare, day-care/education areas, senior citizen assembly centers, co-working space, and EV charging infrastructures, among others. This will add more value and meaning to the project, and new investors will be drawn in by such features. Extensive research is also required to understand the ticket sizes and unit sizes of customer demand, and new projects may be designed with these factors in mind for greater feasibility and success.
(Author has been associated with Kerala real estate sector for more than 25 years and currently, CEO, CREDAI Kerala. He can be contacted at: email@example.com)