The current fiscal has been tough for the Indian economy. The pandemic and the subsequent lockdown have hit the economy hard and most sectors are yet to recover fully. Real estate, tourism and hospitality sectors have been heavily affected. According to industry insiders, there are some green shoots of growth but it's too early to predict a complete turnaround for these sectors in the upcoming fiscal.
Recently, a property in New Delhi’s upscale Lutyens bungalow zone was sold at `170 crore. The sprawling property was bought by Sunil Vachani, Chairman and Managing Director, Dixon Technologies. And this is not a one-off deal. According to Amit Goyal, CEO, India Sotheby's International Realty, “We have closed several high-value transactions in the last four months and there's a robust pipeline of such deals priced up to `150 crore and are confident of closing more than just a handful in the current and the next quarter.”
Such exorbitant sales notwithstanding, 2020 has been a tough year for the real estate sector. Business in the residential segment had fallen by 40% to 50%. The situation took a turn for the better from October, 2020 - mainly riding on festival euphoria and pent-up demand. The softening of interest rates on home loans to around 7% and rock bottom housing prices coupled with attractive special offers from cash-starved developers were positive factors. Governmental support that included extension of interest subsidy for the middle-income group and relaxing tax rules to allow sales of homes valued up to `2 crore at a 20% discount were some appreciable steps.
According to Sushil Mohta, President, CREDAI West Bengal and Chairman, Merlin Group, “Post pandemic, the developers were quite apprehensive about collections from their sold inventory or selling of unsold inventory and as such all the developers were focusing on their ongoing projects. Nobody was willing to launch new projects. It has helped in clearing the existing inventory.
The prices of residential as well as commercial real estate have been stagnant for the last five years. But the cost has gone up by 5%. Actually, the developers were selling the existing inventory hardly with any margin. That is also a reason for new projects not being launched. The silver lining is that December has seen an increase in price by 5% and I am expecting that by March a further increase of 10% will happen. Therefore, there will be some incentives for the developers to launch new projects and I am sure that from March, April we will see launches of a few more projects and new inventory will come. The lowest rate of home loan coupled with old price levels – both have helped in achieving good sales figures. In fact, the sales have been good since October in Kolkata. The demand in warehousing and logistics is there. The demand for a second home is also increasing. The footfalls in malls are back. I think new retail leasing will also start happening from February/ March. If no second or third wave of Covid-19 pandemic strikes us, the overall state of real estate is good and we will be better than the pre-Covid situation.”
For the sector to turn around, the government should consider reduction of stamp duty for the entire country in line with the decision taken by the Maharashtra state government. There is a need for the government to infuse liquidity in the sector through various schemes like the `25,000-crore Special Window for Affordable and Mid-Income Housing (SWAMIH) to ensure expeditious completion of all stalled and stressed projects. Extending the Credit Linked Subsidy Scheme (CLSS) beyond March 31, 2021 for middle-income group (MIG), under which an upfront interest subsidy of up to `2.7 lakh is provided to first-time homebuyers can also be a viable option. However, a significant turnaround for the sector depends on an economic turnaround and if there is significant economic growth in the coming fiscal, the Indian real estate market will find strong winds in its sails.
Tourism and hospitality
The tourism industry in India is slowly picking up pace. However, it has a long way to go before it can reach the pre-Covid stage. In a significant development earlier this year, the Association of Domestic Tour Operators of India (ADTO1) had reached out to the central government to declare 2021 as the ‘Year of Indian Domestic Tourism’. This can be a game-changer for the Indian tourism industry as international travel will take some time to regain momentum. In order to survive, tourism players will have to depend on domestic tourists. Governmental promotion of domestic tourism may actually help the Indian tourism industry to claw back from the brink.
Recently, the concept of ‘bubble tourism’ is in vogue. India and Bhutan have entered into an arrangement where they have agreed to no quarantining for their tourists. The system benefits both countries, financially. Expanding such steps may be beneficial for the Indian tourism sector.
India’s hospitality industry was one of the worst hit in the aftermath of the Covid-19 crisis. The country's hotels are likely to reach 2019 occupancy levels by the end of the fourth quarter of fiscal 2021, as per a report titled "Indian Hotels Performance H1 2020-2021" by Noesis Capital Advisors and Ngage Hospitality.
The upcoming fiscal may see some structural changes in the Indian tourism and hospitality sector. Hospitality players are gearing up to ensure contactless and seamless hospitality services to the guests in the new normal. Hotels will be more likely to use Artificial Intelligence and linking hospitality services to smart devices will be the next big thing. Contactless mobile enabled check-ins will be the norm in the upcoming fiscal year. Contactless technologies are not only offering ease and safety to consumers but also helping hoteliers' weather operational disruptions. Global hospitality players are also toying with robot enabled room service options. In the post-Covid scenario, this can be a major disruption and it will go a long way in allaying fears among guests.
Staycation will be the new norm in travel. It is being increasingly preferred over long vacations and short distance journeys are being preferred over long distances. There is immense opportunity for intelligent tourism and hospitality players to explore these emerging trends. On one hand, a new type of boarding facility will emerge to facilitate the ‘staycation’ needs of the millennials and on the other hand, there is scope for tourism players to develop new locations near cities and metropolises to cope with the demand for a shorter journey.