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The second wave of Covid-19 in the country has stunted demand for residential real estate in India, which had recently shown signs of recovery. But stakeholders are not worried this time around the country is not witnessing nationwide lockdown restrictions like last year.

“The real estate industry is positive about the future as we expect to see an increase in demand once the Covid-19 cases come down and restrictions are eased. However, any change in prices is least expected as it will create a disbalance between demand and supply. Also, many major cities have already witnessed an increase in prices between 10-15% in the past few months,” said Manoj Gaur, CMD, Gaurs Group and VP – North, CREDAI National.

Fall in prices?

“In the long run, there will be price appreciation given the intrinsic strength of real estate as an asset class, but in the short term, I do not foresee any major price hike. Amid the challenging times and uncertainties as regards jobs and income, the economic slowdown caused by the second wave and the set of lockdowns translates into uncertainties for homebuying trends. As the economy faces a slowdown, and with home buying essentially being a sentiment-driven process, the impact will be in the form of prices remaining largely static in the short term,” said Niranjan Hiranandani, National President, NAREDCO.

Pankaj Kapoor, MD, Liases Foras, thinks new properties would see a discount in prices to clear the inventories as affordability has taken a hit due to a reduction in income.

Prashant Thakur, Director & Head – Research, ANAROCK Property Consultants, concurs with Kapoor.

“Property prices will remain flat for the next 6-8 months and may increase marginally after that. Input costs have increased significantly and developers will eventually pass the added cost burden on to their buyers. However, this will most likely not happen in 2021,” he said.

Challenges

According to Hiranandani, the second wave has affected sentiments and has reduced the number of transactions as no site visits are possible in micro-markets although booking of homes continues on digital platforms.

“Work at construction sites has been allowed with ‘on site’ labour; and material is largely available, so slight delays will happen, but as of now, no major delays in sight,” he said.

In some instances, the supply chain has been affected and pricing of some construction material seem to be ‘cartelised’ while in case of some products, the pandemic has caused a demand/ supply mismatch. Given all these aspects, production cost has definitely gone up, he further added.

Demand

“Demand is huge, as evidenced by the fact that sales rose to 70% of the pre-Covid levels until the second wave. People are serious about buying homes and are aware that prices will not go down and that home loan interest rates will eventually harden,” said Prashant Thakur.

There has been a marked increase in property searches online, primarily for 2 and 3 BHK flats. Prospective homebuyers are checking on possible purchases by the festive quarter, further clarity will be witnessed.