According to JLL research, with macroeconomic conditions predicted to mimic those of 2020, there's a chance of a 20-35% increase in house sales during the monsoon months in 2021, similar to what happened last year.
"Despite rising gasoline costs and rising inflation in recent months, the RBI has maintained its accommodating posture and left the repo rate constant." The support system for house sales appears to be intact this year in the upcoming monsoons and approaching festival season, with the assumption of moderated inflationary pressures as supply-side disruptions are resolved and home loan rates remaining at historic lows since last year,” the study stated.
The strong monsoon meant that inflation fell far below 6% by December 2020 and remained there until the end of FY21, following the unlocking process that followed the first COVID wave last year. As a result, the RBI was able to retain the repo rate at historically low levels, allowing commercial banks to keep home loan rates at near-record lows.
“The residential real estate industry may expect a boost in residential property sales this year during the monsoons and the forthcoming festive season, similar to last year when the comparable time saw a 34% increase compared to the immediately previous quarter. Depending on how the pandemic plays out, sales might increase by 20-35% this year. Other economic shocks might severely influence sales growth if a third wave occurs in the coming months, causing it to stay around the lower range of our estimates," said Dr Samantak Das, chief economist and head of JLL's research and real estate intelligence service in India.
With enough rainfall across the country in 2020, the RBI had plenty of leeways to retain key rates at historic lows since inflation was under control. As a result, several people have stepped forward to purchase properties. Home loan rates are likely to continue near record lows in 2021, creating a fantastic opportunity for the residential real estate sector to perform well in the monsoon season.
According to JLL, "This will allow commercial banks to continue to offer house loans at current competitive rates, boosting housing sales. The reduced house loan interest rate will continue to have a favourable influence on EMI outflows, given most home purchases are financed by home loans”, adding house hunting is expected to commence in the upcoming months, particularly in areas like Pune and Mumbai Metropolitan Region, with buyers evaluating projects and residential corridors based on waterlogging, seepage, low-lying areas prone to flooding, and other concerns to reject places or projects. The impending holiday season will also serve as a drive for house purchases during this time.
Housing credit growth has been favourable throughout 2019, except for April 2020, which corresponded with the most rigorous lockout during COVID. Both in 2019 and 2020, it has shown strong rises in the months immediately after the monsoon season, indicating that purchasing mood is on the rise after the monsoon season. A strong monsoon will maintain the attitude upbeat in a market powered by steady pricing, enticing offers, cheap loan rates, and shifting homebuyer preferences.
Normal monsoons also result in a healthy harvest, which means that agricultural and rural loans, which account for a significant portion of priority sector lending as well as bad debts, have fewer defaults, which benefits banks' financial performance in the future. This will provide the financial industry, notably public sector banks, a boost.
The sale of white goods such as televisions and refrigerators would benefit from increased rural demand, which will be aided by excellent rains. A strong domestic consumer attitude would, in general, lead to increased capital investments by families. Inflation can also be kept under control, allowing a portion of household income to be preserved. Given that a strong monsoon would help RBI keep the repo rate low and maintain an accommodating attitude, the country will experience a low-interest-rate environment in the future.