Tier 2 and 3 cities to be growth drivers over the next 2 years; see 'real estate' sector's way forward

Sundaram Home Finance has pegged tier II and III cities to be the growth drivers over the next few years and has drawn up plans to recruit 200 people in the southern market, company Managing Director D Lakshminarayanan has said.

The company was bullish on the long term prospects of the real estate sector, he stated.

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"The housing market will continue to remain resilient and grow this year, flagged by a strong underlying end user demand and growth of smaller cities. The housing demand will see reasonable growth in 2022 and return to the pre-pandemic levels", he told PTI.

According to him, the city-headquartered company has seen a growth spike in disbursements month on month in the last six months that is comparable with the numbers registered in the pre-pandemic period.

The residential market has gathered momentum post second wave and buyers have been back exploring several options.
There is renewed confidence among the buyers and the general buoyancy in the market is reflected by the number of new projects, he said.

To a query, he said the Covid-19 pandemic has altered the way one lives, works and learns.

The overall health, hygiene and wellness concerns during Covid-19 significantly shifted the focus towards spacious homes away from densely packed cities, he said.

"Further riding on the wave of sustainability and prospective investment, the holiday homes and the secondary housing segments have emerged as sought-after option for buyers", he said.

Lakshminarayan said the company witnessed a 'paradigm' shift in the real estate sector towards tier 2 and 3 cities.

"With the Indian economy continuing its growth path, despite the pandemic, the long-term story in the real estate sector remains intact. Due to the pricing consideration, demand off-take and congestion in metros, real estate developers too started moving towards these small cities", he pointed out.

"We expect the Tier II and III towns to register significant growth. Nearly 70 per cent of our disbursements in the first nine months of this financial year have been from these locations", he said.

"The contribution to the business from tier II and III towns used to be just over 50 per cent in the past. The tier II and III towns are likely to expand faster in the future and that offers growth opportunities for us", he said.

To another query, he said affordable housing was the mainstream and likely to be one of the fastest growing segments.
"We have a strong presence in this segment and expect to tap into the opportunities in this space".

On recruitment plans, he said there was a lot of 'significant potential' to grow in the southern market and the plan was to penetrate further into tier II and III towns in the next few years.

"We expect these markets to be growth drivers for us in the next few years. In line with this growth strategy, we have plans to add about 200 frontline staff to serve the smaller locations", he said.

On the fundraising plan, he said it was on track and the company's plan was to raise around Rs 3,500 crore in FY22. "In the first half of the year, we had raised around Rs 1,600 crore and we are in the process of tying up the balance in the second half partly through the NHB lines and market borrowings", he said.

Lakshminarayanan said one of the key lessons learnt during the pandemic was that there have been several tactical shifts that were made, to continue to run the business such as preparing for the unexpected, digital shifts, re-skilling, technology adoption and work from home.

"The most important lesson however has been the renewed commitment to resiliency...We collectively discovered our strengths and how we can work together and collaborate" he said.

Lakshminarayanan was positive on the long term outlook for the real estate sector.

"We are bullish on the long term prospects of the real estate sector. The government's Housing for All vision and the affordable housing projects will ensure that there are enough opportunities in the segments we are in for Sundaram Home Finance to grow in the long term", he said.