Should home buyers cash in on favorable conditions after the second wave?

The Indian real estate industry witnessed record sales volumes for Q1 CY2021 between January and March. This was fueled partly by measures like the stamp duty cut implemented by the Maharashtra Government and also the existing CLSS incentive for MIG 1 and MIG 2 home buyers under the Pradhan Mantri Awas Yojana (PMAY). Yet, the Indian realty sector witnessed a sudden dip in sales volumes at 24,570 units being sold in comparison to 58,290 sold in Q1 CY2021, indicating a dip of 58%. Home buyers are slowly coming back to the real estate market with consultants and developers indicating footfalls recovering to 40-50% of pre-second wave levels. Lockdowns are easing up and due to change in circumstances, things are actually beneficial for home buyers. 

Although PMAY CLSS MIG-1 and MIG-2 incentives have expired along with the stamp duty cut, developers are still offering ample incentives for customers including reasonable payment plans, rent payments till possession, on spot discounts and so on. Buyers are focusing more on ready to move properties since there remain some anxieties regarding construction impact due to any impending third wave. Construction activity was not fully stalled in this year like the last one when the full national lockdown was imposed. 

Buyers need not worry about any sudden increase in home loan interest rates as per experts since the RBI will prioritize growth in spite of slightly higher inflation levels. RBI is likely to advocate bond purchase programs for restricting bond yields and subsequently rates of interest. On the other hand, owing to lower corporate credit demand, banks will keep pushing retail loans while not increasing their rates of interest. 

Real estate prices are currently at their lowest levels which make for a favorable situation as far as home buyers are concerned. Poor sales volumes and higher inventory levels have ensured that housing prices stay muted for quite some time now. The housing price index of RBI clearly showed growth of 1.1% for Q3 FY2020-21. Costs of construction have increased however by 10% going by estimates. This is already putting pressure on the slim margins of real estate developers. Co-Founder and COO at Square Yards, Kanika Gupta Shori, stated that real estate prices may increase by 5-8% at the end of 2021 since input costs have increased sizably. She added that industry leaders will be echoing similar sentiments, indicating that price growth may vary from one market to another although there will be a bump up by year end.