Let’s rewind to the months before the pandemic. A market assessment by Liases Foras showed that half of the unit real-estate supply across 60 cities posed a high to very high risk because developers were not constructing in keeping with committed timelines. About half of these risky projects were located in the Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR); the latter simply had too many projects vis-à-vis demand. About 140 projects had been shortlisted as stuck. And ANAROCK Research tells us that 1,322 projects and 576,000 units were stuck in December 2019. We are all too aware of the lull that engulfed the country when COVID-19 struck. But by September 2020, 60-70 per cent of projects where the builder had sustainable cash flow had resumed, according to Pankaj Kapoor, Founder and Managing Director, Liases Foras. Consequently, “nearly 266,000 units were completed during 2020 in the top eight cities,” reckons Ankita Sood , Director, Research, Growth and Marketing, Elara Group. “Of these, 46 per cent fell in the 2BHK configuration, and 25 per cent each in the 1BHK and 3BHK categories. Nearly 61 per cent of these units were priced under Rs 45 lakh.” So, come December 2020, the position was somewhat better than the previous year. But the real- estate sector was still far from shrugging off the burden of stuck projects. About 300,000 units in 800 projects across the top eight cities were still stuck, estimates Sood. Again, Delhi-NCR and Mumbai were the largest contributors to the pool. ANAROCK Research’s higher estimates tell us that 1,132 projects launched in 2013 or before, accounting for approximately 502,000 units valued at more than Rs 4,07,000 crore, were stuck in various stages of (non) completion across India’s top seven cities (MMR, Bengaluru, Pune, NCR, Hyderabad, Chennai and Kolkata). Roughly 180,000 of these stuck/delayed units worth over Rs 202,145 crore were in the MMR.    December 2019 December 2020 Stuck projects in India’s top 7 cities 1,322 1,132 Stuck units in India’s top 7 cities 576,000 502,000 Source: ANAROCK Research   Why, stuck? So, why were so many projects stuck? It’s easy to blame it on market fluctuations, but as Ram Raheja, Director, S Raheja Realty, points out, “Market fluctuations affect projects but not so much that projects would get stuck.” Another way to answer that question is to examine why some developers have no stuck projects. “We have never been stuck with anything,” says Raheja. “We don’t overleverage and we don’t get into projects with technical issues, where someone wants to get something from the land in question, which usually happens if a developer has overlooked a reservation or got approval for a plan that shouldn’t have been passed.” The challenge is that developers get into projects with 10-20 per cent of the budget, thinking ‘sales will get me funds’; of course, then you will get stuck, continues Raheja. “We ensure we have achieved financial closure.” “We remain committed to 20 projects with over 10 million sq ft, across 15 cities, across residential, office and serviced apartments,” says Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure. “We follow strict construction timelines, transparent policies and customer-centric approaches to ensure all our projects are on track and delivered on time,” shares Rajendra Joshi, CEO – Residential, Brigade Enterprises. Moving stuck projects Among the factors that helped getting stuck projects going again, Prashant Thakur, Director & Head – Research, ANAROCK Property Consultants, cites the Government’s creation of the Alternate Investment Fund in late 2019 with a corpus of Rs 25,000 crore. “This last-mile capitalisation mechanism couched in the Special Window for Affordable & Mid-Income Housing (SWAMIH) fund aimed to alleviate the liquidity crunch that had thrown up roadblocks for developers. And it has proven to be at least marginally effective. Other government and RBI’s liquidity-generation initiatives in 2020 also helped.” “The real-estate specific stress fund (SWAMIH) has been a good step in helping the completion of stuck projects,” agrees Sood. “Loan recasting at the project level (as suggested by the KV Kamath Committee) also helped cushion the cash-strapped supply side.” Demand-side interventions As so many developers were cash-strapped, a couple of proactive state governments chipped in to boost demand and restore cash flows. For instance, Maharashtra reduced stamp duties from 5 per cent to 2-3 per cent in August 2020 through to March 2021. Karnataka, another state making a major contribution to the housing market, experimented with a similar cut. Voila! Sales rose by 200 per cent in Q3 compared to the previous year, observes Siddhart Goel, Senior Director - Research, Colliers International India, citing the Maharashtra government’s website. In particular, Mumbai and Pune saw nearly 1.5 times more sales in Q3 compared to Q2 CY2020, as per PropTiger Research. In Q4, Mumbai and Pune saw 148 per cent and 62 per cent growth in sales compared to the previous quarter. “Property registrations in Mumbai grew three times in December 2020 as against December 2019; Maharashtra showed good growth especially in the primary market, largely owing to stamp duty relaxations,” says Kapoor. Vimalendra Singh, Chief Sales Officer, Mahindra Lifespaces, believes the timebound stamp duty reduction in Maharashtra encouraged fence-sitters in the first two quarters to proceed with their purchases. “Certainly, the stamp duty cut was very favourable; we are in the luxury space where a saving of 4 per cent on a Rs 10 crore flat translates into Rs 40 lakh, which is a lot of money,” says Raheja. “We have had almost Rs 100 crore in sales so far this year with about 10-15 per cent of our sales going to NRIs.” However, Sood points out that this uptick in sales must also be attributed to the festive season, low interest rates, developer schemes and pent-up demand. “We saw a positive uptick in sales and enquiries since July 2020 and also experienced a good festive season,” shares Singh. In his view, the lockdown also played a role in this revival. “What emerged very clearly from the lockdown was the renewed importance of home ownership and all its allied benefits, including shelter and quality of life.” “Government action to reduce stamp duties and premiums in Maharashtra combined with a higher intent towards home ownership as a result of the pandemic have helped drive a turnaround in sentiment towards residential real estate,” agrees Pirojsha Godrej, Executive Chairman, Godrej Properties. “The real-estate sector has recovered from the initial impact of the pandemic.” In Q3 FY21, Godrej Properties witnessed 25 per cent growth in booking value to Rs 1,488 crore and 51 per cent growth in booking volume to 2.40 million sq ft. “We are headed towards 250,000 unit sales across Tier 1 cities by the end of FY 21; within this, NRI sales and the second home market are both up 20-30 per cent (higher in Maharashtra), shares Dutt. “Residential sales have exceeded the previous financial year’s sales.” Dark clouds Backed by government incentives and developer discounts and offers, Thakur expects the momentum in housing sales to continue in the current quarter. Goel also expects the sales momentum to continue in Q4 as stamp duty has increased by only 1 per cent till March 31, 2021, before it reverts to pre-pandemic rates. He expects demand to pick up pace from H2 2021 to slowly grow to pre-pandemic levels in the next couple of years. News of the vaccine and the gradual pickup of the economy have boosted positive sentiments and are expected to boost sales. “Yes, liquidity for residential projects remains tight but we are seeing some interest from private funds to provide last-mile funding to feasible projects,” he adds. It’s not all good though. Kapoor believes that the euphoria in the market because of the recent pickup of sales is misplaced. The Indian residential realty market has a huge inventory of 13.5 lakh units across 60 census cities, according to Liases Foras. But, revenue is down about 25 per cent from Rs 2,47,000 crore to Rs 1,88,000 crore. And with Rs 700,000 crore in bank loans outstanding, sales must increase two times for the industry to stay afloat. The Government is very aware of this need and to this end, builders have been granted the concessions we elucidated, and a few more in the recent budget—a tax holiday on affordable housing projects till March 31, 2022, a commendable supply-side stimulus, which combined with all-time low home loan interest rates and the stamp duty reduction in Maharashtra, is expected to provide a strong stimulus to affordable housing, as per Singh. Add to this, social security to construction workers and an extension of capital expenditure in infrastructure, the latter of which will expand connectivity and push investment in smaller cities, according to Joshi. “In that sense, the pandemic has been a blessing in disguise for developers,” continues Kapoor. But going forward, he expects the tally of stuck projects to increase after two to three months when activity further resumes and the monitoring of projects under RERA starts in full scale. The fate of stuck projects depends on the impact of the delay on the margins of each project, opines Dutt. “If the debt burden from the delay has eroded whatever margins were possible and there is no incentive for the developer to perform, the defective baby may be left with the PE or/and banks or/and NBFCs to take a haircut and bring in another developer, or monetise the under-construction asset, or let homebuyers take over,” he elaborates. “However, if the surplus suffices to pay for last-mile funding, service all the debt and comply with RERA’s customer compensation norms, the project may be taken up and completed to the delight of the homebuyers.” Sorting out realty So, is there a way out of this enduring ‘stuck’ challenge? What would really help boost activity and generate demand for inputs such as steel and cement are production-linked incentives, according to Kapoor. “Existing incentives such as telling builders to take care of stamp duty on the part of customers to halve their premium aren’t helpful as the intended passthrough doesn’t really happen because the real-estate industry has no MRP (maximum retail price) concept. Builders simply jack up prices and show they are passing on the benefit. Unless incentives get passed on to customers, the very high inventory levels will not drop.” Sood proposes expanding the scope of the SWAMIH fund to provide last-mile funding to other projects impacted by the pandemic. She would also like the central bank to consider easing the criteria for loan recast for the real-estate sector to include developers/projects currently left out from its scope. Also, GST on cement should be lowered while the input tax credit should be reinstated, believes Joshi. “Measures to boost the prop-tech sector, in particular, to spur start-ups driving innovation and technology in real estate would help as well.” Increasing the limits of exemption for interest on home loans from Rs 200,000 to Rs 500,000 and reducing capital gains tax from 20 per cent to 10 per cent would help push the market, opines Kapoor. For his part, Harshavardhan Neotia, Chairman, Ambuja Neotia Group, proposes hiking the Rs 2 lakh tax rebate on housing loan interest rates to around Rs 5 lakh to boost housing, especially affordable and mid-housing; personal tax relief, either through tax rate reductions or amended tax slabs such as upwardly revised deduction limits under Section 80C; GST waivers for under-construction homes, even for a limited period; measures like the recent limited-period stamp duty cut in Maharashtra; more incentives for private-sector investments in affordable housing which is suffering from a fund crunch and low profit margins despite being designated an industry; and easing liquidity to help developers keep up the supply pipeline, especially for in- demand, ready-to-move-in homes. Giving industry status to the real-estate sector, including secondary housing and holiday homes, is a long-pending demand that would help developers raise funds at lower costs, he adds. We were looking forward to industry status for real estate and a single-window clearance mechanism, agrees Dutt. “One GST, one or no stamp duty regime and reduction in registration charges across states will make a significant difference to the cost of a project and definitely encourage homebuyers. Laying emphasis on the implementation of RERA will protect the interest of all stakeholders.” The fact is, the cost of governance, compliance, capital and state government delays has made real estate unviable for many, Dutt continues. To improve developer liquidity, he proposes reducing the provisioning requirements for loans to real estate, extending the flexibilities offered to banks to NBFCs, allowing GST input credit for residential and commercial and allowing FDI in ready-to-move-in residential inventory. He proposes a stimulus to end-consumer demand by restoring the subvention scheme for real estate, introducing a 3 per cent interest rate subsidy for buyers of affordable and mid residential units for three years, cutting state stamp duty to 2 per cent across states, removing capital gain, and allowing the deduction of bank interest from home rental incomes. Then, Indian realty will truly be on the road to recovery. How can construction in India be made easier? Between 2019 and 2020, India moved up from the 77 th rank (of 190 countries) to the 63rd rank in the World Bank’s ‘Doing Business’ reports. Ease of doing business definitely impacts construction activity, says Siddhart Goel, Senior Director - Research, Colliers International India. “Andhra Pradesh topped the most recent Central Government ease-of-doing-business ranking followed by Uttar Pradesh and Telangana. While Karnataka and Maharashtra continue to have the highest number of construction projects, the top three states in the ease-of-doing-business ranking are witnessing a strong surge in construction activities.” Within the doing business criteria, however, is ease in dealing with construction permits. In that, India jumped from the 52 nd rank in 2019 to the 27 th rank in 2020. Behind this leap lies considerable work to improve construction permit system processes under various stages of implementation in states such as Andhra Pradesh, Uttar Pradesh, Telangana and Haryana, among others. But to improve the overall ranking, every state will need to abide by best practices, says Ankita Sood , Director, Research, Growth and Marketing, Elara Group. This includes adopting an integrated online system for building plan approvals, issuance of completion and occupancy certificates and faster no-objection certificates for construction permits. “Single-window clearances, encouraging innovation and the infusion of credit are some industry expectations,” she adds. Industry voices spoke of the gains from single-window clearances. “One-window clearance is all we want,” affirms Ram Raheja, Director, S Raheja Realty. “Take undertakings but give us approvals fast, because getting approvals from different agencies involves a lot of effort and these delays cost us.” Accelerated, single-window approvals for affordable projects would further boost activity in the value homes segment, opines Vimalendra Singh, Chief Sales Officer, Mahindra Lifespaces. A positive is that the Central Government is encouraging states to have online portals for the approval of construction permits, and is envisioning an integrated platform for external and internal agencies to provide clearances quickly, observes Goel. “The sooner these initiatives are implemented, the faster and more sustainable will be the growth of real estate.” New launches in 2020 Data indicates that the top seven cities saw about 586 new project launches comprising approximately 128,000 units in the calendar year 2020, shares Prashant Thakur, Director & Head – Research, ANAROCK Property Consultants. “At least 70 per cent of the unit-supply (new launches) during the year was in the affordable and mid-segments (priced < Rs 80 lakh) while 21 per cent was in the higher budget range (Rs 80 lakh to Rs 1.5 crore) and 9 per cent was in the luxury segment (priced > Rs 1.5 crore).” Affordable housing projects accounted for almost 54 per cent of the overall new supply in 2020, followed by the mid-segment and then some luxury projects, adds Siddhart Goel, Senior Director - Research, Colliers International India. “Most of the supply was of 2 BHK units followed by 3 BHK at the pan-India level.” Seeing these opportunities at both ends of the spectrum, affordable as well as high-end units, the Brigade Group launched towers within existing residential developments and new residential projects in Bengaluru, Chennai, Mysore and Hyderabad, with unit prices ranging between Rs 33 lakh and Rs 2.15 crore. These include Jasper at Brigade El Dorado, Bengaluru, located close to the upcoming KIADB Aerospace SEZ; Brigade Citadel, Hyderabad, located in a prime locality (Moti Nagar) and the largest ever residential development in the city; Brigade Sapphire, Mysore, a gated community known for its connectivity to major IT hubs in the city; and Tranquil at Brigade Utopia, a 47-acre township offering a gated community lifestyle replete with retail, commercial and other such facilities. The Ambuja Neotia Group also sees scope for all sorts of housing. It is developing a mid-scale project (south Kolkata), townships (Kolkata and Siliguri), studio apartments (Lataguri) and country homes (Raichak), and will launch luxury projects (Kolkata). It proposes to open a mall in Patna and build hotels in Kolkata, Sikkim and Patna to be managed by the Taj Group. Its commercial projects span compact office spaces to meet the growing need for smaller and flexible work environments and office blocks in Patna. Commercial property currently accounts for 30 per cent of Tata Realty’s portfolio with residential making up the rest. Intellion Parks, Intellion Edge and Intellion Square with over 6.3 million sq ft enjoy over 94 per cent occupancy. Tata Realty wants to balance its asset diversification and increase the share of commercial property to 60-70 per cent of its portfolio, or 45 million sq ft, in the next seven to eight years and list the Tata Office REIT within two years. These new investments will be in the top cities: NCR, Mumbai, Bengaluru, Pune, Hyderabad and Chennai. Tata Realty will soon be relaunching a residential project in Mulund and two fresh projects in Andheri and Chembur. Mahindra Lifespaces successfully launched an affordable project, Happinest Palghar, and has project launches lined up in Mumbai and Pune. S Raheja Realty launched its largest redevelopment project, two towers of 12 residential storeys plus four storeys of car parking, in Khar Mumbai. In FY 21, Godrej Properties launched Godrej Royale Woods, Bengaluru; Godrej Green Cove, Pune; Godrej Retreat, NCR; and The Highlands in Panvel. Fate of commercial property Supply in the commercial office sector has fared much better than residential. Colliers estimated that supply was down by just 6 per cent at 38.1 million sq ft compared to 2019. Despite ‘work from home’, the office market reached 27 million sq ft absorption, where it is expected to remain through 2021 until it potentially recovers to 30-35 million sq ft by 2022, observes Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure. “Warehousing/logistics, data centres, e-commerce, artificial intelligence and new start-ups and unicorns are likely to further the momentum.” Bigger homes gain from the pandemic Speaking of the impact of the pandemic on new launches, Siddhart Goel, Senior Director - Research, Colliers International India says, “Developers have come up with innovative options to cater to buyers’ demand for houses that facilitate work from home and attending online study classes, adding an extra study room for an office-like environment or an extra room, even business centres within residential complexes, and planning more independent homes like villas and row houses.” “Work from home and office has renewed the significance of, and interest in, larger, spacious homes,” agrees Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure, citing improved sentiment in Tata Realty’s spacious projects like Myst in Kasauli, Tritvam in Kochi, Raisina Residency in Gurgaon, Serein in Mumbai and Avenida in Kolkata. Myst recorded over 345 per cent increase in revenue and 86 per cent increase in enquiries in FY 21 compared to FY 20. - CHARU BAHRI