How is Indian real estate faring? Tanuj Shori answers

In a candid conversation with ET NOW, Square Yards Co-Founder and CEO, Tanuj Shori, put forth his insights on the realty sector. He stated that the market is already touching levels seen before the coronavirus pandemic while adding that several factors make this a great time for buyers to invest, i.e. lowest ever mortgage rates, stamp duty and registration cuts on property across several States, prices touching rock-bottom and developers realizing that they need to price and position their projects better in the aftermath of the pandemic. 

Earlier, according to Shori, the inventory pile-up was due to projects being priced wrong and due to incorrect positioning which is something developers are realizing now. While the property sector is still coming out of its bearish phase over the last 8-9 years, there is a pick-up or turn-around on the horizon. New launches are fuelling buyer interest, they are even selling out quickly in some cases, irrespective of whether developers are slightly increasing prices to offset pressure on margins due to component cost increases. People are still lapping up new projects at comparatively lower prices and with lower rates of interest. This was not the case 3-4 years back when demand would nosedive with even the slightest increase in property prices. 

He opined that Bengaluru, Pune and Hyderabad are recovering faster than other metros while highlighting the lack of organized supply in smaller cities. If that was not the case, then those markets would have witnessed fast traction as well. He also talked of real estate in India suffering due to lack of organized supply and not demand, while hoping for more organized players in the market in order to create a sense of more balance. Today, the top 20 developers majorly hold market share, something which can be balanced out with more players in the organized sector. At the same time, consolidation is still ongoing, particularly with regard to acquisition of land. 

Shori felt that residential rental yields are quite low in India and the scenario will not change in the near future at least. For yields to increase, either prices have to considerably come down or mortgage rates have to collapse even further. Commercial real estate however, is still an attractive proposition according to him. Shori feels that the market may pick up this year or the next year and a turn-around is imminent although he prefers the wait and watch mode for the next couple of quarters before being confident about a recovery phase. Also, the real estate industry has a 5-7 year cycle and once it fully picks up, the positive momentum could continue for a longer duration according to Shori, especially since the market is coming out of an 8-9 year slowdown. 

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