HOW CORONAVIRUS AFFECTED REAL ESTATE IN INDIA?
Covid-19, popularly known as the coronavirus and declared a pandemic by the World Health Organization, impacted almost all countries across the globe. It is a highly infectious and deadly virus that is transmitted from human to human rapidly. Besides being a health and well-being issue, it drastically affected some vital sectors of the world economy, including real estate.
It’ll be incorrect to say that coronavirus alone impacted the Indian economy. In reality, the Government imposed a lockdown to curb the spread of coronavirus. And the economy came to a standstill because of the lockdown. It did not spare even the real estate sector as the demand fell sharply. In this blog post, we will explore the effects of coronavirus in India, with a focus on real estate markets.
IMPACT OF CORONAVIRUS ON PROPERTY PRICES IN INDIA
The real estate sector in India is the second-largest one, accounting for about 12% of GDP. These facts make the real estate market an essential contributor to economic growth and increasing employment rate. Earlier, the demand for real estate used to be consistently high, leading to a surge in prices of property that benefitted the investors. After the outbreak of coronavirus, the purchasing power of people got reduced. For most of them, health became a priority. Many people who had decided to buy a property in 2020 postponed the same. They started saving up for medical emergencies and focused on fulfilling the basic needs of their families.
Moreover, real estate was no more the priority of numerous people who lost their jobs or suffered losses in business during the pandemic. Hence, the demand declined steeply. On the other hand, the development of many real estate projects stalled as labourers migrated back, and Covid-19 disrupted supply chains too. The deadline of the projects got delayed to an uncertain period. As a result, the supply also dropped. The fall in demand and supply led to the falling of property prices in certain areas and stagnancy in others which negatively impacted the entire real estate sector. Consequentially, the investors suffered losses. It will take time before the property prices rise again. However, the fall in prices serves as an indicator of how coronavirus affected real estate in India.
EFFECT OF CORONAVIRUS ON RENTAL PRICES IN INDIA
Coronavirus brought about a revolutionary change in the working model of various companies. With the introduction of the work from home concept, employees living in metropolitan cities moved back to their hometowns. Even students left the cities, as the colleges and schools were closed and migrant exodus happened simultaneously. All these factors contributed to a reduction in the demand. It again resulted in a fall in rental prices of residential flats in many areas. For example, Gurgaon saw a decrease in rental rates. But in the long term, the prices remained stable because many people also decided not to move out during this period. Rent drop was also seen across center city apartments as well as in premium locations. Moreover, the sharply falling demand also brutally affected real estate brokers and agents. Some of them got compelled to leave this profession and look for other alternatives.
IMPACT OF CORONAVIRUS ON INVESTMENTS IN COMMERCIAL PROPERTY IN INDIA
With remote working culture kicking in, many companies decided to give up on their lease for office space in commercial properties of various cities. The demand for office spaces is falling and will fall steeply in the future too. As malls, restaurants, gyms, and theatres got shut for longer durations during the lockdown, many failed to pay their rentals, leading to heavy losses for the investors. Some shops had to close down because of non-payment of due rentals for longer durations. Thus, real estate investments that always used to fetch high returns were running in losses. It further discouraged new investors from investing in this market.
HOW LONG WILL IT TAKE FOR THE REAL ESTATE MARKET TO RECOVER?
It has been a while since coronavirus affected the real estate markets in India, and there appeared no signs that any property sales or apartment rentals will increase anytime soon. There was a hope of a quick revival of the market when things seemed normal after the first wave. But the horrific second wave that took thousands of lives in India made things worse for the real estate sector.
However, a good sign is that property prices in most places haven’t dropped. They have just remained stagnant without any increase. The real estate market has experienced great returns and profits in the previous decades. Therefore, sluggish growth in property prices and a decline in profits seem very unlikely. Fortunately, according to experts, the market is in its revival stage. There are high chances that real estate prices will rise and the market will bounce back strong. Hence, all the stakeholders must remain optimistic about the revival of the real estate market.