More consumers desire home ownership over renting despite COVID-19 challenges: Report

Mumbai:  Economic uncertainty and rising stock market volatility is positioning real estate as the preferred asset class for investments in India with over 50% of consumers considering buying a new home in the next six months, says JLL, India’s largest real estate consultancy firm. According to JLL’s Homebuyer Preference Survey, 91% respondents wanted to buy a home when asked to choose between buying and renting. Additionally, 67% believed that buying a home is a necessity, not a luxury.

The evolving COVID-19 pandemic will also influence short-term decision making with job security cited as the biggest concern when contemplating the purchase of a home, respondents say. The survey uncovered that a greater proportion of people in the age group of 20-35 years were likely to defer their home purchase plans by more than six months. Polled consumers above 35 years indicated that they are more inclined towards buying a property in the next six months. Also, more than 50% of the prospective homebuyers indicated a preference to buy a 2 BHK apartment with size ranging from 800 to 1,000 sq ft.

“Real estate has emerged as the most resilient asset class today and we see the potential for more consumers to pivot towards homeownership in the longer-term. In tandem, ongoing work from home arrangements are pushing developers to become more flexible and give homebuyers the option of creating a study room if need be,” said Ramesh Nair, CEO & Country Head (India), JLL. The pandemic has also accelerated the pace of digital transformation amongst developers and intermediaries. In the past, we’ve seen project discovery happen online, this moved to virtual tours and interactions, and now one-fifth of the respondents in this survey said they’re digital-ready to affect their transaction online end-to-end,” he added.

The requirement of study rooms as work from home practices are adopted is a key highlight of the study. Elsewhere, the importance of healthy living is gaining currency as societies with wellness amenities are being favored. Furthermore, homebuyers want to mitigate the risk and are willing to pay a premium for properties from reputed developers, showing an affinity towards ready-to-move-in properties in gated societies and township projects.

“It is encouraging that more than 50% of the prospective homebuyers surveyed have expressed their readiness to potentially buy homes within the next six months. At the same time, developers are relatively flexible to allay buyers’ concerns in this fragile business environment with respect to immediate cash outgo and long-term financial obligation by offering attractive flexible payment options with a minimum upfront payment,” said Samantak Das, Chief Economist and Head Research & REIS, JLL.

Interest varies by market

The markets of Hyderabad, Pune and Chennai provide indications of relatively healthy inventory management in terms of average construction period and YTS (years to sell). Further analysis reveals longer-term resilience might appear first in the southern markets of Bengaluru and Chennai. The larger markets of Delhi NCR and Mumbai have high levels of unsold inventory in various stages of construction as well as greater YTS due to a prolonged slowdown in sales. The proportion of prospective homebuyers who deferred their home purchase decisions by more than six months is also higher in these larger markets.

Affordable and mid segments will continue to drive the market

Most respondents indicated a preference for properties in the sub INR 50 lakh and INR 50-75 lakh category. On the supply side, developers have also realigned their products, with 60% of the new launches in the past two years falling in the INR 50 lakh and INR 50-75 lakh price segments. The alignment of demand and supply will support the recovery process and it is expected that the affordable and mid-price segments will continue to witness maximum traction in the post-COVID era as well.

According to JLL, COVID-19 can be credited to be the catalyst for accelerating vital trends such as price rationalisation in larger markets, adoption of technology platforms to enable seamless buying and selling while resetting the significance of ‘owning’ a house amongst potential homebuyers. The survey was conducted in June-July this year and has seen participation from 2,500 respondents across Mumbai, Delhi NCR, Bengaluru, Pune, Chennai and Hyderabad.