There is not a shred of doubt that every single industry has been affected by the COVID-19 pandemic. Surely some of them took the grunt more than others. With people’s lives and livelihoods changing drastically during the various lockdowns and restrictions, we have seen unprecedented behaviour from the consumers.
Shifting priorities due to significant changes in disposable income has affected investment patterns all across the globe. On-site jobs faced the highest levels of uncertainty. This meant a huge shift in plans for both real estate buyers and developers.
To understand how to move forward, it’s necessary to understand the trends of the past. This is why today we’ll take a deep dive into the effects of the two COVID-19 lockdowns on the real estate sector in India and all the stakeholders involved.
Real Estate And The 1st Wave Of COVID-19
The first wave of COVID-19 was disastrous for business. No one knew how to handle it or had any ideas as to how long it would last. The uncertainty translated into a major halt for the Indian real estate market.
Every single graph showing the performance of the Indian real estate sector, in any segment, showed a steep decline. India’s top 8 real estate markets showcased a fall of 54% year-on-year on home sales. This resulted in the sale of just shy of 60,000 residential units in the top 8 cities in India.
The number of new launches also took a hit as developers needed to offer huge discounts or other financial schemes to prospective buyers. Just over 60,000 residential units were launched in the first half of 2020, owing to the first lockdown.
The unavailability of waged labour in these top cities also led to postponed launches. Delhi NCR, Hyderabad, and Chennai took most of the impact in sales with nearly negligible sales that went up to two, or three digits.
Here are some statistics from the first half of 2020:
1. The unsold inventory in the top eight cities dropped by a meagre 1% and landed at 446,787 residential units.
2. To tempt the financially strained buyer segment, the affordable housing segment, housing under INR 50 Lakh, was increased. The segment that was clocked at 51% in 2019 was now 58% of the real estate residential segment.
3. NCR saw a sharp decline in the rental segment of the real estate sector. Rents dropped 8.8% in NCR as compared to the first half of 2019.
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Real Estate And The 2nd Wave Of COVID-19
This time we were prepared. Or should we say better prepared?
By the time the second wave of COVID-19 hit the nation, the Indian real estate sector started showing an upward trend. The real estate market was making a robust comeback owing to government help and the motivation amongst buyers to find a more secure investment and better living situation.
However, there was a huge difference between the first wave of COVID-19 and the second. The loss of life during the second wave was much greater. This meant the contagion rate surpassed the first wave, making people more cautious about on-site activities like site visits. This definitely had an impact on the sales of property during the second wave of COVID-19.
1. This was not always a challenge though. Developers say that due to the severity of the second wave and the lack of site visits, the quality of their leads significantly improved. This meant, a customer walking in through their door was more likely to convert into a home buyer.
2. The second wave was also accompanied by reduced home loan interest rates and stamp duty. However, predictions that these lowered home loan interest rates and other perks will soon be pulled back had already started doing the rounds. This incentivised a lot of home buyers to speed up their buying process and get their homes registered around the second wave of COVID-19.
3. The second wave also established the work-from-home model as a sustainable, practical, and possible way of functioning. This meant geography was no longer a constraint for home buyers. This increased the demand for luxury second homes or holiday homes, with a focus on sustainability and green spaces.
4. Sales post the second wave of COVID-19 were predicted to be at a lull. However, the real-estate consumer base bought homes at a rate that shocked experts. The Mumbai real estate market even reached a decadal peak in 2021.
COVID-19 Impact on Real Estate Buyers
Homebuyers across the globe saw a major shift in priorities in regard to their living situation. One of the biggest shifts was noticed in studies that declared Gen-Z as being the keenest generation when it comes to homeownership. The level of security that homeownership provides was duly noted during the two waves of COVID-19 as the rental segment became more uncertain than the finance industry.
According to Knight Frank’s survey, 26% of mainstream Indians had moved into their own homes during the pandemic. Another 32% had prioritized homeownership and planned to move into new homes within the next year.
This sudden shift was highly influenced by work-from-home policies. It allowed people to relocate without geographical boundaries, and give more weightage to space inside and outside their homes.
COVID-19 Impact on Real Estate Developers
Similarly, to the real estate buyer segment, the real estate developers also had a significant shift in priorities while planning and designing projects. Where affordability was the highest priority amongst mid-segment developers, amenities, sustainability, and luxury took a hold of the real estate development market.
Features like open green spaces, touch-free elevators and other common use amenities, spacious homes, green building certifications, and clubhouses became all the rage in new launches and proposed projects.
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COVID-19 Impact on Real Estate Migratory and Daily Wage Workers
The most impacted stakeholder in the Indian real estate sector was migratory and daily wage workers. During the first wave of COVID-19, these workers moved back to their hometowns after facing horrendous living conditions due to lockdowns in bigger cities like Delhi NCR, Mumbai, Chennai, Bangalore etc.
Bringing the workforce back to big cities post the lockdowns also became a hurdle for developers as no security could be offered to them in case another lockdown was imposed by the government. This puts the livelihoods of thousands of daily-wage construction workers at risk and is still a problem that has no clear solution.
The pandemic has been a very difficult time for everyone. The lockdowns came with the loss of life and financial losses. But the perseverance of humankind shows that we are capable of turning anything around. This is what helped the real estate sector in India to grow back to almost pre-covid levels.
While it’s still a struggle to predict how long it will take the Indian real estate market to get back to a level of growth we were seeing before COVID-19 hit, we can safely assume that we’ll get there soon.