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Optimistic Outlook Expected to Resurge in Residential Real Estate in H2 2020

Posted by Propfin on July 19, 2020
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The outbreak of COVID-19 and the worldwide lockdown imposed to contain it has severely affected most industries and the realty sector is no exception. From construction being halted to a dip in sales, a number of issues have emerged. A large section of the homebuyers aren’t taking the risk to visit project sites. However, several factors are also giving the developers the hope that the sector might eventually stabilise.

Although the government has given the green light for the resumption of construction activities, project handovers would still be delayed by at least 8 months. The unavailability of labourers is posing a major problem as construction cannot be resumed full swing without adequate workforce. Moreover, the supply chain of raw materials has also been disrupted and would cause delays.

The shortage of materials, intensified by the disruption in imports, would result in higher construction costs. However, the burden of the extra cost is unlikely to leave much impact on the buyers because considering the current market scenario, the developers are guarding against increasing property prices in a significant way.

Many of the developers are taking the help of technology to maintain connections with their potential customers. Web portals, AR/VR, digital 3D models of projects, etc. are being used extensively to solve customer queries. The leading real estate companies are also taking special precautions to ensure the protection of their employees, with necessary sanitation and protective equipment.

With about 200 ancillary industries, the real estate sector contributes 7% of India’s GDP. This industry is important not only for the economy but also for the employment prospects it offers across the country. The RBI has announced a number of changes which would boost liquidity in the real estate sector. These include a significant reduction in repo rate and extension of loan moratorium. The government is considering a number of changes too, including a reduction in home loan interest rates. These moves would assist the real estate sector to return to normalcy.

The trend of purchasing properties online is growing popular. Online home sales have risen, thus providing the developers with some cash to resume projects stalled due to the credit crunch. The prices for residential properties are expected to fall to some extent as the cash-strapped developers might reduce rates to increase sales. Investment from NRIs might rise quickly as this is a golden opportunity for them. The value of INR against the USD has fallen significantly, and this, along with the fall in prices, would make the homes much more affordable for the NRIs. For now, ready-to-move apartments are the highest in demand. The ready-to-move homes in luxury projects where services aren’t disrupted easily are expected to sustain the demand and witness sales. The demand for affordable homes is also on the rise as the COVID-19 crisis has decreased the purchasing power of most buyers. Though it would take time, Indian real estate will bounce back with the increase in sales and necessary assistance from the government. It is expected to stabilise in the second half of 2020.

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