Indian realty sector recovers in third quarter

V Nagarajan

India’s real estate market saw a smart rebound in Q3 of 2021 as mobility restrictions were relaxed and business started to return to normal. Sales grew by a considerable 92% YoY to 64,010 units during Q3 2021. Demand momentum was strong across markets in Q3 2021 with all markets reporting a YoY growth in sales, according to Knight Frank India’s survey.

Mumbai and Bengaluru, which account for over half the inventory in the market, saw sales grow by 109% and 131% YoY respectively during the third quarter. The share of sales in the ticket size Rs 5 - 10 million grew to 35% in Q3 2021 compared to 32% a year ago. This can be attributed to the homebuyers’ need to upgrade to larger living spaces with better amenities.  Homebuyers are more inclined to acquire built units or near completion units to minimise completion risk.

Developers have responded well to the shift in homebuyer sentiment, launching new projects to capitalise on this surge in demand. New launches have grown at a brisk 90% YoY during Q3 2021 with all markets showing a healthy growth in supply. As with sales, the units launched in Q3 2021 exceeded the 2019 pre-pandemic quarterly average by 6%.  

In order to push sales, developers had pursued an aggressive pricing strategy over the year with spot discounts, finance deals, stamp duty waivers and other freebies to entice buyers. Markets such as Chennai, Hyderabad and Kolkata have seen prices increase marginally during the quarter.

The office market has consolidated well in 2021 so far, despite a severe second wave of Covid infections and the looming threat of a third wave. Q3 2021 has been the strongest quarter of the year with 12.5 million sq ft of office space transacted, a 168% growth in YoY terms. The January – September period in 2021 saw 13% more transaction activity compared to the previous year.

Corporate India started taking significant steps toward resuming work from office during this quarter with some IT majors announcing their intention of returning to the workplace. Among the larger markets, transacted volumes in Q3 2021 in Bengaluru and Chennai have exceeded their 2019 quarterly average. The IT sector was the largest consumer of space during the quarter and took up 34% of the area transacted.  The manufacturing sector accounted for 3.7 million sq ft or 29% of the total area transacted. This can be attributed largely to a 1.5 million sq ft transaction by a wireless technology hardware manufacturer. The increased transaction volumes during Q3 2021 can be attributed in part to relaxed lease terms such as increased rent-free periods or rent discounts.

New completions also picked up significantly with 11.9 million sq ft getting delivered in Q3 2021, a 67% growth YoY. Bengaluru, Pune and Hyderabad accounted for 73% of the new completions with Bengaluru seeing the most space delivered at 4 million sq ft.

I took home loan at 8.50 per cent a few years ago. Now that it has come down at 6.8 per cent, can I shift it to another bank or other institution?  Please clarify.  Selvyn, Sharjah.

Yes.  You can transfer from one housing loan institution to another. However, you will have to follow certain ground realities.  You must take into account the overall cost that may be incurred and also the cost-benefit analysis, taking into account preclosure charges from the existing institution and processing fees in the new institution.  You can also negotiate with the existing lender for a reduction specifying the intention to transfer the loan due to high interest rate.  After analysing all the aspects, you can take a decision.  There are home loan agencies that might be of guidance to you.

I had purchased 20 years and sold it three months ago to invest in a larger apartment. My daughter would be raising funds through home loan as I am not eligible. Am I entitled to claim capital gains tax exemption? Debtosh, Dubai.

Yes. You intend to invest the entire capital gains on sale of the old flat in acquiring the larger apartment.  You will be investing through home loan raised by your daughter.  As you are purchasing the new flat within two years from the date of the sale of the old flat, you will be exempted from capital gains tax.