Demand for larger homes
Work from home has transformed Real Estate demand
Covid has significantly impacted various markets and Real Estate is one. However, the Real Estate market, especially the residential market has bounced back in a big way. There was a significant amount of built-up demand during the festive season in Q4 2020 and as a result, housing sales have reached an exact 100% of the pre-Covid levels. In the case of the residential market, latent demand has been catalyzed by a multi-decade low home loan interest rate and flexible price and payment terms offered by developers. Additionally, due to Covid, there is a greater need for homeownership and people spending more time indoors on account of restricted mobility during the pandemic. With the Covid impact, work-from-home (WFH) and online classes for students have become the new normal. This has translated into strong demand for bigger and better houses.
Consumer demand, post-Covid, has undergone a significant shift with new preferences. There’s a growing demand for flexible spaces, supplemented with smart modular furniture, ample open spaces, and good ventilation to meet the wellness requirements of WFH. There is an increased demand for 2.5 BHK and 3.5 BHK homes so that extra space can be converted into makeshift workspaces. There is also increased demand for functional flexible spaces that can accommodate work areas since WFH is a reality and is here to stay. This makes it imperative for developers to transform their designs and build more efficient layouts to tailor to customers’ demands. Some developers have also made provisions for business centers within apartment complexes to meet the demand emanating from WFH. This has enabled other ancillary e-businesses to flourish as well, such as Urban Ladder and Pepperfry.
Buyers have been more inclined to look for larger apartments while upgrading from current accommodations. This has been increasingly true for first-time buyers as well and this is reflected in the fact that apartments priced over INR 50 lakh had a larger share of sales at 57% compared to apartments priced under INR 50 lakh at 43% during H2, 2020. Apart from the need for a larger space, the home purchase affordability index has ironically increased in most Tier 1 and Tier 2 cities. With WFH, employees have saved on travel costs and other sundry expenses which have enhanced their disposable incomes. Millennials have also realised the benefits of home buying as opposed to renting. They are prepared to move city outskirts for the sake of bigger yet affordable lifestyle homes, hence savings of about 35–60 percent in buying homes in peripheral locations.
Supportive measures from the central government and the Reserve Bank of India (RBI) have made buyers get their dream at affordable prices. The RBI has kept repo rates at all-time lows in 2020 which has also spurred the growth in the residential market. Also with the reduction in stamp duty charges and the fall in dollar prices have forced NRI’s to invest in the residential market which has shown an upward trend. Larger homes have not only been preferred for home-buyers but also investors looking to make better returns. They are able to leverage the lower home prices to invest in additional square feet offered by the larger homes. As the price per square feet increases and demand in peripheral areas of Tier 1 cities continues to rise, buyers get better returns on their investment.