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Festive home sales - reality versus narrative

The rise in sales growth is the number of property registrations - primary and secondary. After two waves of COVID-19, job losses and salary cuts have led to imbalance of debt to income ratio among homebuyers which in turn has led to a rise in the number of distress sales in the secondary market

Representational image.

Representational image.

If the real estate industry narrative is to be believed, then this festive season has already made headlines with the best ever housing sales this season. But in a market where the predominant reality is job losses and salary cuts, a market where an average Indian is reeling under hyper-inflation, homebuyers are least impressed with reports of the real estate market beating all sales records.

Here’s a look at the sales pitch being set to impress homebuyers this festive season.

Consumer sentiment at an all-time high this festive season

Most surveys this season have said that consumer sentiment is at an all-time high following two waves of COVID-19. In India, housing is an aspirational product, so much so that you ask any Indian and he would never deny that he needs a house. The question here is not to aspire for a home but to be able to afford one.

Most reports talk of real estate buying and sales patterns in the Top 10 cities. It goes without saying that in a country where income to property prices are so skewed, majority of homebuyers fall under the top 10% of the demographic profile. This is the class that is under tremendous pressure post Covid-19 due to job losses and salary cuts.


Sales have touched 90% of pre-COVID-19 levels this festive season

It’s important to know the base level that is indicating a housing growth up to 80-90%. The comparative scale is the sales number of the same quarter last year. We all know how the first wave of COVID-19 had put all celebrations on hold last year. So, any miniscule growth is but projected as phenomenal growth on the given scale.

Since the lifecycle of an average real estate project is no less than five years, sales benchmarking has to follow the same pattern. The sales statistics will not give a clear picture unless it is collated on the scale of average sales in the last five years. But then real estate reports conceal more than they reveal.

Sales numbers speak for themselves

It is true that the numbers don’t lie. But the numbers could easily mislead in a business where data transparency has always been an issue. The basis of sales growth in most surveys is the number of property registrations. But there is no separate data available that differentiates primary market sale and a secondary market sale.

After two waves of COVID-19, job losses and salary cuts have led to imbalance of debt to income ratio among homebuyers which in turn has led to a rise in the number of distress sales in the secondary market. A homebuyer unable to sustain the loan EMI finds it easy to get rid of the long-term financial liability in an uncertain economic environment. But the property registration data would reflect this distress sale as just another sales number!

People want bigger homes; commercial property signs green shoots of recovery

Isn’t this narrative self-contradictory? Either Work-from-Home is leading to the demand of bigger homes or people are returning back to their offices. How is it possible that someone working from home is also a catalyst for demand for more office space? This could only be possible in an economy where the job growth is phenomenal. But the ground reality is that the quarter-on-quarter the job degrowth is just too depressing.

The irony is that within the large universe of Indian real estate every stakeholder sets his own narrative. For a commercial developer, the agenda is way too different from the residential builder. It is not a mutual fund kind of linear business where the leading players would put their money together to create a narrative of “Mutual Fund Sahi Hai.”

Millennials are pushing sales

Another interesting narrative is that the global pandemic has taught millennials the importance of owning a roof above their head. Sounds good in theory but the real issue is not what you want but what you can afford. Can they afford a home is the question as there are reports that hundreds of them have gone back to their home towns leading to a fall in rentals in the country’s top seven cities.

Real estate market is thriving in Tier-II and III cities

The truth is that people have moved to their hometowns because they cannot afford city rentals. So, how can they afford to buy a home back in their hometown? It’s a classic case of contradictory industry narrative.

The average homebuyer, for whom the narrative is being set, is not amused. The larger issue today is still to do with trust and transparency. The right narrative in today’s market would have been to explain the benefits of attractive pricing rather than set a false narrative.

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Ravi Sinha is CEO, Track2Realty.
first published: Oct 31, 2021 10:32 am
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