Ready homes, large units, and remote working set-ups are in demand, states The Hindu’s RoofandFloor and JLL’s recent Homebuyer Preference Survey
While the COVID-19 pandemic’s impact has been greatly felt across all industries, in the real estate sector, it has significantly altered consumer behaviour and preferences. While some of these changes will be fleeting in nature, others will be permanent.
In the residential real estate sector, for instance, there is still a great deal of uncertainty around the permanent changes industry players and buyers are likely to witness in the days to come. While long-term structural changes are often only apparent with the luxury of hindsight, one can be certain of a few things, states The Hindu’s RoofandFloor and JLL’s Homebuyer Preference Survey 2021.
Given the multitude of forces at play within the industry and the pandemic catalysing the pace of transformation, the Survey was aimed at understanding how homebuyer preferences have changed (or not) over the course of the last few quarters.
Here are its key findings:
What are the reasons to purchase a new home?
The report reveals that self-use continues to be the primary reason, while investor interest increases in certain markets. Considering everyone was forced to spend an inordinate amount of time in the comfort of their homes during the rigorous lockdowns, it led many to re-evaluate their buying preferences. The period also highlighted the sense of security that comes with having a roof over one’s head.
In certain markets like Hyderabad — which have seen a reasonable appreciation in home prices over the last few years — an increasing interest from investors was witnessed as they found this to be an opportune time to strike a good deal with developers. There is also a growing interest in owning larger homes and holiday homes.
In a nutshell
- Residential real estate is an enabler of our existence and contrary to popular belief, recovery in the residential sector was quick and more resilient
- Post ‘Unlock 1.0’ of 2020, the uptick in residential sales was primarily driven by pent-up demand and the presence of ‘affordable synergy’ in the market
- The sustained recovery in the next few quarters and the resilience shown during the second COVID-19 wave are indicative of a fundamental shift in the sentiment towards home ownership
- The remote working trend is here to stay and will continue to significantly impact homebuyer preferences
- Digital transformation will be the key to staying relevant in the next normal world
A majority of the buyers making a home purchase for self-use can be classified into three distinct categories: first-time home buyers, those upgrading to larger or better houses, and clients purchasing a second asset to be used as a holiday home.
Over the course of the pandemic, the proportion of buyers in the two latter categories has increased. This is driven by the need for larger spaces to work or study from home and the desire to use the second home as a retreat in the event of future outbreaks
Budget and configuration preferences
Increased demand for larger apartments: Nearly 80% of the prospective home buyers indicated a preference for properties in the sub-₹50 lakh and ₹50-₹75 lakh categories. This hasn’t changed much over the course of the pandemic. Nevertheless, the size of the apartment has assumed greater significance and there is a clear preference for larger, more spacious homes. Prospective buyers are showing a greater willingness to relocate to suburban/peripheral markets in order to get larger homes while keeping the budget intact.
Emphasis on floor plans: In addition to larger homes, prospective buyers are keenly looking into the layout of apartments, the presence of balconies, and an additional room for work/online classes. This trend is more prominent in the cities of Mumbai and Pune where 1BHK and 2BHK are usually the most sought-after configurations.
Connectivity to office and schools no longer dictate home purchase decisions: The factors and features that a prospective home buyer considers while making a purchase has not changed to a great extent. However, there has been a shuffle in the relative importance of these aspects. Lower density environments, access to open green spaces, healthcare and the size of the apartment have moved up in importance in the decision-making matrix.
Developers have also taken cognizance of the changing preferences and are open to customisation in order to suit buyer needs. Additionally, the developer profile now occupies an even more significant position in the decision-making matrix. There is an increased preference and willingness to pay a premium for projects by developers with an established track record.
Changing definitions: The location of a property has always been and will be one of the most important factors influencing home purchase decisions. Nevertheless, the definition of a ‘great location’ has changed over the course of the pandemic. Earlier, connectivity to office hubs and schools was the primary concern. This has now changed with equal or even greater emphasis being given to features such as access to healthcare and proximity to open spaces such as parks, gardens and green areas. This being said, it is important to note that connectivity to public transport hubs is still an important factor in the decision-making matrix.
Affordable locations attracting buyers: The Work-From-Home (WFH) phenomenon is here to stay and this has tilted homebuyer preferences towards peripheral sub-markets. Today, prospective buyers are more willing to take up the occasional longer travel to work in exchange for spacious homes at affordable rates in less crowded spaces.
Construction status preferences
Ready or under construction apartments in demand: Prospective clients continue to prefer ready-to-move-in apartments by reputed developers. However, the ready home inventory by established developers has gone down in certain markets. In such cities, prospective buyers are becoming more open to making purchases in under construction projects by developers with an established track record. This shift is further driven by the fact that the price differential between ready projects and under construction projects has gone up over the past few quarters. Developers are offering more flexibility and price discounts in under construction projects, whereas the price of ready to move in projects by reputed developers has witnessed an uptick.
Furthermore, structural reforms within the real estate industry seen over the last few years started the process of weeding out smaller, unorganised developers from the market. The COVID-19 pandemic was the final nail in the coffin as it tilted the scale further in favour of established developers. Most of the new launches, especially during the pandemic months, have been driven by reputed developers.
The Survey has stated that prospective buyers are planning on making a purchase within the next three months. Developers have been operating on very thin margins for the past few years, and as the market recovers, reputed players are becoming less flexible in terms of offering price discounts and other benefits to buyers. New clients want to make the most of this ‘great time to buy a house’, with more than 80% of the prospective buyers inclined towards buying a house in the next 3 months.
Residential market’s recovery path
Activity levels have definitely increased, but there is still some way to go before the market reaches pre-COVID levels. This being said, it is important to point out that even though the current business environment and consumer sentiments remain volatile, home buyers remain cautiously optimistic about the future.
The recovery process, which started in Q3 2020, was derailed in Q2 2021 because of the second COVID-19 wave. With a majority of the prospective clients expected to make a purchase in the next three months, the residential market is expected to get back on the recovery path and 2021 is likely to end on an optimistic note. New launches are expected to go up in H2 2021 as developers launch new projects in order to monetize their land banks. Moreover, we might even see a reversal in trends with developers launching larger sized houses and apartments in order to capture the changing preferences of consumers in the post-pandemic era.
Most of the changes witnessed in the sector have been structural in nature and demand for homes is only expected to increase. Importantly, lockdown restrictions across cities are being eased and the vaccination drive is gaining significant momentum. If the impending Covid-19 wave can be contained and consumer sentiments improve further with the festive season, the sector is expected to make a healthy recovery in the second half of 2021.