COVID, WFH reverses trend, increases average flat size

Satish Nandgaonkar

In a major trend reversal of shrinking flat sizes, the Indian housing market has seen a 10 per cent increase in flat sizes from average size of 1050 sq ft in 2019 to an average size of 1,150 sq ft across seven cities with Mumbai showing the highest increase of 21 per cent, according to a research report released by Anarock property consultants

 

Experts attribute the reversal in the trend to the impact of COVID-19 pandemic and the new Work From Home (WFH) office culture.

 

In the past four years, the average apartment sizes were shrinking year on year. In 2017 average apartment sizes reduced by 13 per cent from an average size of 1,440 sq ft in 2016 to 1,260 sq ft. With the pandemic underlining the need for a secure and larger home appears to have dictated the reversal, Anarock research said.  

 

Hyderabad continues to have the largest average apartment size of 1,750 sq ft among the top seven cities. It increased by 3 per cent from 1,700 sq ft in 2019. However, Mumbai and Pune have witnessed the highest increase in average flat size.  Anarock data showed that in Mumbai, the apartment size increased from 773 sq ft to 932 sq ft in 2020 – an increase of 21 per cent. In Pune, the average apartment size grew from 878 sq ft in 2019 to 986 sq ft in 2020, an increase of 12 per cent.

 

After Mumbai and Pune, Kolkata witnessed a growth of 10 per cent with average flat sizes increasing from 1,000 sq ft to 1,100 sq ft followed by Chennai which saw it increase from 1,100 to 1200 sq ft in 2020.

Anuj Puri, Chairman – ANAROCK Property Consultants says, “The two main reasons for apartment sizes reducing in previous years were affordability and millennials’ preference for low-maintenance homes. Keen to generate more buyer interest with smaller price-tags, developers whittled down their flat sizes. 2020 saw an almost immediate reversal of buyer preferences. With the accent suddenly being on accommodating the WFH and learn-from-home culture, flat sizes began increasing for the first time in four years.”

After stamp duty, Maharashtra cuts premiums by 50 per cent

                                                                  Representational picture @Satish Nandgaonkar

                                                        

Satish Nandgaonkar

Mumbai developers on Wednesday welcomed the decision by Maharashtra government to cut construction premiums by 50 per cent approved in the cabinet meeting held today.

Reacting to the cabinet approval for the cut in premiums, Dr. Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO) said the bold move to cut premiums by 50 per cent for ongoing as well as new projects till December 31, 2021 would bolster the real estate sector.

 Describing the move as “booster dose”, Dr Hiranandani said, “This move will go a long way in expediting the project completion and the industry will witness new launches in the market.”  He said the reduction in premiums for new launches will mean lesser input costs for developers, and could lead to lower prices for new inventory entering the market over a period of time.

 “It is a move expected to meet the urgent need for economic activity and generating employment. The industry will be injected with additional liquidity in the backdrop of cumulative policy reforms due to Covid pandemic, which has been considered as a 'force majeure' situation by the Government of India. This reduction in premiums will help in quick turnaround of projects and uplifting Industry sentiments," he said.

The cabinet note on the decision said that the housing projects which will take the benefit of this scheme will have to bear the full stamp duty charges on behalf of the home buyer from April 1 to December 31, 2021. The note said that Ready Reckoner rates 2019, 2020 - whichever is higher will be applicable. The decision will continue the momentum in real estate sector for another year, and will also benefit the home buyers, it said.

The cut in premiums was among the recommendations made by the Deepak Parekh committee to uplift the real estate sector which witnessed complete evaporation of demand during the stringent Covid-19 lockdowns in April 2020.

Deepak Goradia, President, CREDAI-MCHI, which represents over 1,800 developers across Mumbai Metropolitan Region, said, “We welcome this historic decision by the State Government to reduce the premium charges for the Real Estate Industry and are confident that this move will expedite the economic recovery of Maharashtra with more than 250 allied industries dependent on the real estate sector, which will also generate widespread employment."  

"The Govt has once again walked the talk on making affordable homes a reality for lacs of citizens in Maharashtra. The premium reduction, coupled with the stamp duty charges which will also be borne by the developers, will lead to reduced cost for homebuyers thereby increasing their purchasing power - further underlining the opportune time for them to buy a house in MMR," he said.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said the premium cut will provide a great boost to teh supply side. "New supply has been restrictive due to many reasons including cost of raw material (land being raw material to real estate development) in the last many years, especially in large volume markets like Mumbai and Pune. This move will help rationalise input costs for the developers as well as help supply momentum, thereby keeping price escalation in control whilst striving towards the demand – supply equilibrium in the market. However, since both the demand side as well as supply side measures are short term, it may prove beneficial to jump start the real estate sector giving it an orbital velocity for next level growth," he said. 

"This will also make the sector attractive for investments from institutions. The reduction in premiums, coupled with the revision in stamp duty (that has helped catapult demand) will make real estate development in the state lucrative. Going forward, following the growth trend of demand, we expect new launches to increase accordingly. 

As per Knight Frank’s report released today, MMR recorded sales of 22,407 residential units while new launches in the same period were recorded at 18,515 both registering a Year on Year growth. Residential Sales grew 80% in Q4 2020 over same period last year," he said.

Anuj Puri, Chairman – ANAROCK Property Consultants said Mumbai has as many as 22 premiums compared to 10 premiums collected in Bengaluru or five in Delhi and just three in Hyderabad. "Hefty premiums in Mumbai ultimately result in increased working capital requirements for developers - in a market where lenders are already wary of lending to real estate players. Amidst the ongoing liquidity crunch, these premiums put an additional financial strain on cash-starved developers, making it unviable for many to proceed with development. The disadvantage to homebuyers is that high premium charges lead to increased cost of a residential project, which is ultimately passed on to them. Rationalizing these premiums will definitely give a boost to Mumbai's real estate industry. Reduced development costs to developers and therefore lower purchase cost to homebuyers can result in increased demand," he said.

Puri said these premiums, levies and cesses are paid to the city's municipal corporation and reduced premiums would mean that the state government rakes in less revenue. "This would to some extent be compensated for by the increased number of project developments in the city. The state government will also generate more stamp duty and registration revenue from increased housing sales," he said.

He pointed out that average property prices in Mumbai are a staggering Rs 17,845 per sq ft compared to Rs 4955 per sq ft in Bengaluru or Rs 5,487 pert sq ft in Pune, and hefty premiums is one of the prime reasons among many other factors. "Also, reduced premiums can help developers avoid project delays due to funding issues. A significant reduction in these premiums will give a massive boost to developers’ execution capacity, and this will result in more projects being developed and completed. Redevelopment, which is a critical factor in the city but attracts multiple steep premiums, also becomes more financially viable for developers. The added supply all around will help rein in property prices," Puri said.

Reactions from industry leaders

Siva Krishnan, Managing Director and India Head, Residential Services, JLL India. 

 "This move will help to reduce the landed cost for the Developers thereby rationalizing the cost and reducing the burden on customers. It is expected to further trigger the recovery of the residential real estate market which has seen a good uptick in last 2 quarters due to factors like lower interest rates, pro-active measures from the govt like stamp duty reduction. These moves, coupled with the current measures will go long way in enticing both end users and investors back to the residential market. The country's residential sector is already seeing an acceleration in sales leading to a fast paced recovery from the impact of the pandemic."

Manju Yagnik, VCP, Nahar Group and Senior Vice President, NAREDCO West

“This step will be a direct incentive for homebuyers waiting for the right time to invest in real estate.   The move is a win-win for developers and end-users. It will lead to a reduction in the project cost for developers. We saw the effect of reduction in stamp duty, it led to stellar sales from the month of September-December, with the sales data for last month hitting a multi-year high. The reduction in premium will lead to a revival of stuck projects, new launches, higher sales. It will more than offset the loss incurred to the state government in terms of higher sales like it did in the case of a reduction in stamp duty.”

"The premium for construction of projects is the highest for Mumbai city, and it accounts for over 25% of the project cost in some cases. “The real estate industry is key to the overall growth of the economy, it needs government hand-holding to boost demand and revive growth."

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory 

“After the temporary reduction in stamp duty charges, the 50% reduction in premium payments until December 2021 will benefit the supply side immensely. It will also help developers pass on further benefits to homebuyers, invigorating demand for real estate projects that are under construction,” he said.

“This move is likely to propel developers to offer extended payment holidays and also give lucrative price proposals to buyers in projects  where the inventory has been selling slowly. While the pandemic and subsequent lockdowns made developers focus on completing existing projects and largely postpone launching new ones, this move of halving the different kinds of premiums and levies is going to make developers contemplate going back to launching new projects.” 

Mani Rangarajan, Group Chief Operating Officer, Housing.com, Makaan.com and Proptiger.com

“The reduction in premiums would help the Mumbai market as the city collected as many as 22 premiums under various heads, which is higher than other top cities. High premium puts a financial burden on developers leading to higher costs for the homebuyers. In the current economic scenario, the step would ease the burden and soften the prices resulting in more sales in the coming months.” 

Rohit Gera, Managing Director, Gera Developments 

"The move to reduce the premiums is extremely welcome. It will provide respite to the cost burdens for developers thereby spurring on more supply at lower prices.  It is, however, important to realize that the charges paid for approvals include development charges and other charges under other heads.  Effectively, this means the total benefits will be much less than 50%"

Ram Raheja - Director, S Raheja Realty

 “This move will certainly boost the existing demand in real estate. Especially in cities like Mumbai, the cost of land is high and therefore a cut in construction cost will be a huge relief for developers who have been dealing with low margins. Also, there will certainly be a passing on of the benefit in terms of the price which will lead to increased interest from fence-sitters. This will especially impact luxury housing where the ticket-size is higher. 2021 will certainly be the year for real estate.”

 

Kris Raveshia, CEO, Azlo Realty

“Maharashtra state government has set an example once again by reducing the premium and levy charged on construction for a year, this is a step in the right direction. The move will benefit all stakeholders, developers in terms of the reduced construction cost for projects; for customers, it will help reduce prices and boost demand; for the government, it will help increase premium and levy collection as the move is likely to revive stuck projects.

 

This development will act as a stimulus for the real estate sector. Any reduction in cost, prices is a direct incentive for homebuyers/investors to invest in real estate. A fact proved right when the state government reduced stamp duty last year, it helped register record sales for the month of September-December. We are confident, like stamp duty reduction resulted in higher collection, this move too is likely to help the state government with higher revenue collection.

 

 The real estate sector has been long demanding a reduction in premium and other levies from the state government. The number of premium and amount is the highest for financial capital – Mumbai, it amounts to almost 25-35% of project cost for the developers. The state government has been the first to provide relief to the industry and other states tend to follow it. We are confident the reduction in premium will also help attain its desired results in boosting industry and consumer sentiment, making real estate affordable for more and more people.”

Sanjeev Chandiramani, Chief Operating Officer, Ruparel Realty

 "The Maharashtra Government’s decision to cut the real estate premiums by 50%, has set a momentum for the positive start to the year.  As per the new DCPR rule, the cut will be applicable till 31st December’21 and along with the recent stamp duty reduction will provide a dual push for sales of residential apartments. Additionally, it will provide the much needed economic relief to the developers and the funds can be utilized for faster completion of projects. This will also lower purchase cost for the buyer and will result in higher demand and improved industry sentiment.  We believe that the premium along with the recent stamp duty reduction will further incentivize the homebuyers and make it opportune for them to buy a house in MMR region. We are delighted to have strong support from the state government and are hopeful to see a surge in Mumbai’s real estate market this year."

 Abhishek Jain, Chief Operating Officer, Satellite Developers Private Limited (SDPL)

''After being hit by the pandemic, the real estate sector has seen a solid recovery on the back of stamp duty reduction and a good festive season. Now this move of reduction in premiums by 50% will help rationalize input costs for the developers and will go a long way in expediting project completion thereby keeping price escalation in control. The industry will also witness new launches in the market attracting investments from institutions. All in all a good move that will sustain the growth of the real estate industry in the coming months.''  

Dr. Adv Harshul Savla, Principal Partner, Suvidha Lifespaces (M Realty)

 "Increased FSI and reduced premiums will increase new launches and lead to reduction in prices of new under construction inventory. However, the double impact of these two factors may also lead to a dramatic crash in the value of units in the old resale buildings as home buyers may prefer units in brand new buildings than resale buildings. It may also bring the consumer spotlight back on under construction inventory from ready to move in or near completion buildings, making them scarce." 

Farshid Cooper, Managing Director, Spenta Corporation

"This is a very encouraging announcement at the start of year by the Maharashtra Government. The lockdown had worsened the situation and the liquidity crisis in the real estate industry. The department’s proposal to provide discounted premiums of 50% on all new and on-going projects will go a long way to ease the liquidity constraints faced by the sector. This will boost new launches in the market and lead to a reduction in the project cost for developers. The stamp duty reduction helped the sector regain from the pandemic with property registrations rising in the state and now with lesser premiums it will provide great impetus to the business. Homebuyers should definitely consider this as a golden opportunity to buy their homes."

 

Nitin Gupta, Sr. Vice President,  Sales,Marketing and CRM, Mantra Properties

"With reduced stamp duty charges and now this rationale move by the government brings in great relief to the developers wherein ever increasing costs of construction can be offset to an extent.  The environment today with low interest rates, reduced stamp duty was pushing the demand for homes and with the reduction in premium charges, we've got a catalyst introduced to help the sector grow."

 

Stamp duty cut gives traction to premium South Mumbai homes

 

                              Courtesy: Knight Frank India Research

 

Satish Nandgaonkar

After facing several years of stagnancy, the premium housing segment in Mumbai Metropolitan Region appears to have got good traction in the fourth quarter of 2020, indicated the half yearly report “India Real Estate: H2 2020” released by leading international property consultants Knight Frank India on Wednesday.

Mumbai Metropolitan Region clocked sales of 48,688 units in calendar 2020 out of which 30,042 were sold in the second half of the year. Out of this, 22,407 units were sold in the September-December quarter of the year as buyers took advantage of the prevailing market conditions -- a 3 per cent stamp duty cut till December 31, discounts offered by developers, lowest interest rates on home loans. MMR sales recorded a staggering 193 per cent increase over Q3 (7635 units).

The data from MMR micro-markets indicated that premium and mid-segment units in Central Mumbai (432 units), South Mumbai (287 units) and Western Suburbs (3854 units) witnessed exponential year-on-year growth in sales. Central Suburbs (2220 units), Navi Mumbai (1854) Peripheral central suburbs (6150) Peripheral western suburbs (4650), and Thane (2960) also witnessed a healthy growth.  

“As the absolute savings from stamp duty cut is higher in the higher ticket size segments, the relatively expensive markets of MMR and luxury segments languishing for the past few years witnessed a jump in sales. South Mumbai witnessed the highest growth in sales of 112% during H2 2020, followed by Central Mumbai at 106% and Western suburbs at 76% during the same period. As a result, 57% of apartments sold in H2 2020 were priced above Rs 50 lakh compared to 52% during H2 2019,” the report said.

The Knight Frank Research showed that for the first time since H2 of 2017 (when the sector was reeling under demonetization, RERA reforms), the sales number was higher than the number of new launches. In H2 of 2017, the new units launched stood at 7,490 units, while the number of units sold stood at 30,179 units. In 2018 and 2019, the number of units launched far outnumbered the number of units sold in the each 6 month block. In H1 of 2020 too, 23,399 units were launched and 18,646 were sold. However, in H2 of 2020, thanks to the Q4 which saw record sales, 26,904 units were launched, while 30,042 units were sold.

The average prices decreased by 3.2 per cent year on year. The average weighted price of Rs 7014 per sq ft in 2019 decreased to Rs 6787 per sq ft in 2020. The unsold inventory which had increased in H1 of 2020 from 1,45,301 to 1,50,054 declined to 1,46,916 units in H2.

The affordability index for Mumbai indicated that the affordability increased from 94 per cent in 2015 to 61 per cent in 2020. “It means that 94 of the income of a home buyer was going towards paying the home loan EMI in 2015 which has improved to 61 per cent in 2020,” said Rajani Sinha, Chief Economist and National Director – Research, Knight Frank India.

“Central database will benefit real estate"

 

Satish Nandgaonkar

Housing and Urban Affairs Minister Hardeep Singh Puri on Tuesday agreed to create a central database of all State RERA authorities which could bring greater transparency to the real estate sector and benefit all stakeholders.

Puri was speaking after the online release of “Efficacy of RERA From the Consumer Perspective 2020” prepared by Moneylife Foundation and HDFC Ltd in the presence of Deepak Parekh, Chairman of HDFC and Gautam Chatterjee, Chairman of Maharashtra Real Estate Regulatory Authority (MahaRERA)

Creation of such a national database is one of the 20 recommendations made in the report. Responding to a comment by Debashis Basu, founder trustee of Moneylife Foundation underlining the importance of centralized data, Puri immediately approved the idea. “Data will be more valuable than gold. Let us have a central database, which will have all the constitutional segments, including the states. Let us have all the stakeholder access to the database because the maximum transparency that you can introduce, you will find that the sector begins to benefit from that free flow of information,” he said.

Puri also pointed out that the Modi government carried out key amendments to the 2013 RERA draft while passing the act which brought historic changes to the real estate sector. The Real Estate (Regulation and development) Act came into effect from May 1, 2017, bringing ongoing real estate projects under the monitoring of the state RERA authority. Barring West Bengal, RERA has been adopted by 34 states and union territories.

 

According to the Minister, the history of real estate sector will be divided as pre-

RERA and post-RERA period. “The Report prepared by Moneylife Foundation and

HDFC makes very important recommendations, ranging from definitional issues

to reconciliation between provisions. The Report also highlights how orders

passed by regulatory authorities are not being implemented in some cases. I

assure you that we will have it all thoroughly examined and take corrective

measures as deemed necessary,” he said.

 

Improving execution process of RERA orders, better enforcement of model sale agreement, inclusion of rehabilitation component of redevelopment projects and old tenants pagdi buildings under RERA, inclusion of RERA perspective in Insolvency and Bankruptcy Code process, removing ambiguity in RERA carpet area definitions, formation of Association of Allottees in every registered project are some of the important recommendations made in the report.

 

HDFC chairman Deepak Parekh said the record property sales registrations in December as a result of a stamp duty cut did not reflect “pent-up” demand, but genuine aspirations of home buyers to own a home. He said the next thrust in the

real estate sector will be on rental housing. “The minister (Mr Puri) had already charted out plans, now it is up to all stake holders how we can make rental housing popular,” he said, adding, “With construction-led recovery, I feel India will build and India will grow.

 

MahaRERA chairperson Gautam Chatterjee said the quantum jump in sale registrations also resulted in a spurt in registration of new projects with the authority. He said around 1,200 new ongoing projects were registered with MahaRERA in the past quarter.

 

He said 27,700 ongoing housing projects were registered with MahaRERA and 20,000 real estate agents. He said 13,000 complaints were received by MahaRERA since May 1, 2017, and 8,900 orders were issued. He said 94 per cent of these complaints were of pre-RERA projects,  and only 50 per cent of these projects have been completed. “We thought three years would be adequate to deal with legacy of pre-RERA projects, but clearly it is not. These projects need to be completed,” said Chatterjee, who will complete his term this month. He said the recommendations made in the report were also raised at the all India conference of RERA authorities held in Lucknow, and it is for the government to act on the recommendations.

 

The report said over 60,000 housing projects and 45,723 agents were registered with all RERA authorities. These regulatory bodies disposed off 60,000 complaints.  

Merudand Seedha Rakh!

Usually, the first post for such blogs should be an editorial. But, I would like to begin this blog by sharing a video by actor Jackie Shroff on his Youtube channel, Bindas Bhidu. Jackie has seen the highs and lows of the film world, but has always smiled on.

At 1.35 minutes in the video, Jackie shares a truth that he has lived by, and would be worth it if the Indian journalistic community tries to live by.  Keep your spine erect, comrade!