The future of Indian real estate after the pandemic
Experts expect slow but steady recovery
December 19, 2020
Even if the Covid-19 pandemic has drastically impacted the real estate sector in 2020, experts hope for better days in 2021, provided that the situation returns to normal and that real estate adapts to new trends.
“In these extraordinary times, stakeholders from all sectors have the opportunity to structurally reinvent their strategies to ensure a sustainable recovery. This would require moving away from traditional approaches and embracing new transformational methods – which would be accelerated by widespread adoption of technology, sustained political momentum and increased investor interest in India ”, Anshuman Magazine, CEO, India, South East Asia, Middle East & Africa, CBRE, tells India Media Group.
In the first three months since its onset, the pandemic halted construction activities and significantly eroded its base of potential buyers. With real estate transactions falling to near zero during the nationwide foreclosure between March and June 2020, the real estate industry has faced its most difficult times ever. The interdependence of supply chains, labor migration, cost overruns and liquidity constraints have come to the fore and have become some of the looming challenges.
Given the already depressing situation in many segments of real estate, developers are advised to reset house prices to stimulate demand as some hotels seek to change land use to residential. The demand for office space suddenly drops, and malls are seeing tenants cancel leases or refuse to pay rent. In addition, consumers who own a home or wish to own it in the near future are also confused.
In the first week of October, Housing.com, a Mumbai-based real estate portal, reported that home sales in India’s eight major cities fell 66% between July and September 2020. However, experts at the industry claim that contrary to fears and low expectations, real estate in the post-Covid world will most likely survive and eventually thrive as an asset class, albeit different.
“With several macroeconomic indicators showing a positive trend in the near future, we may well be on the path to a more sustained recovery and the next two to three months will be critical in determining the growth path of the sector over the twelve next months. months, ”said Dhruv Agarwala, CEO of Housing.com. India Media Group.
Although it is only in its early stages, there are visible indications of some of the ways the pandemic may change things for consumers and developers. It’s important to note that the winds of change were not sparked solely by the pandemic.
Home becomes a priority
“The spread of the coronavirus has surely halted sales and rapid development. However, the pandemic has also made buyers aware of the value of homeownership, thus boosting selling sentiment in residential real estate, ”Agarwala said.
In a survey conducted by Housing.com in September this year, 53% of those polled said they only put their plans to buy a property on hold for six months and plan to return to the market after that. . Almost 33% of survey respondents also said they would need to upgrade their home to be able to work from home. In a survey of tenants, 47 pc of respondents said they would like to invest in real estate if the price was right.
“The home will gain in importance in the workplace and influence urban development and our real estate choices. The good news for India is that the long-term trend in housing demand remains secular as a young population continues to enter the labor market in large numbers. Over the past few years, there had been a gradual shift in mindset among first-time homebuyers who began to prefer a rental home, challenging the established Indian preference for buying homes, ”Agarwala adds.
Shrinkage of commercial spaces
Agarwala says the commercial office sector was the most preferred segment of institutional investors and had peaked in terms of prices before the pandemic. The impact on the sector is expected to be severe given the reduced space requirements of businesses due to the increased adoption of the work-from-home model, which is now an integral part of their long-term strategy.
Additionally, office spaces occupied by startups and small businesses face challenges due to funding and headwinds they face. Health and hygiene would take precedence over space efficiency and offices would be redesigned for the post-Covid world.
“CEOs would be looking to keep costs down and the most glitzy building in the heart of the shopping district might not have the same appeal. Although the form the office takes will depend on the nature of the business and the strategy of each company, it goes without saying that the commercial real estate industry is almost closed, ”he adds.
Post-Covid, the demand for retail space would also change. We will favor open-air common areas with independent access to shops and showrooms, according to experts.
“Malls in the suburbs with stores in major city streets will gain importance over centrally air-conditioned large-format malls. In these new formats, retail would be more focused on catering, wellness, leisure and entertainment, with less focus on shopping, ”Agarwala explains.
In the hospitality industry, due to mandatory Covid security protocols and the need for social distancing, small hotels and properties will be under great pressure. “Hotels, especially independent properties with less than 20 rooms or assets that had been hastily converted to hostels and guesthouses would likely see closures and conversions to residential use,” he adds.
Technology comes to the rescue
Before Covid, the adoption of the technology by real estate developers was limited to the listing of properties online. During the lockdown, the developers came up with offers in which the site visit was completed virtually via 3D tours extending to support and run online documentation. Developers are now integrating virtual site visits, virtual reality online reservations, chatbots and payment platforms into their digital communication and sales strategy.
“The benefits obtained by developers through technological efficiency and disintermediation would inevitably be passed on to the end customer to some extent in the form of price moderation as well as easier reach and transparency. », Explains Agarwala.
Recovery on cards
As the nation gradually opens up after the lockdown, real estate markets have also started to recover. According to several leading research reports, the Indian residential real estate market is on the way to a decisive comeback in serious homebuyers’ demands, which are 50 pc from pre-pandemic levels in major cities.
Bangalore leads the country in terms of real estate recovery, and ongoing investigations fell to 70% over the January-February period, followed by Gurgaon in Delhi NCR, at 65%, according to real estate consultancy Liases Foras.
The report further states that luxury home buyers in India easily invested in high-end properties after the coronavirus pandemic. The main reasons for this trend are the attractive discounts and deferred payment facilities offered by developers during the pandemic situation. “High-end homebuyers are also investing in high-value / strip plots. The situation is a win-win situation for both parties. While buyers want to own assets, developers also want to quickly monetize their assets, ”says Agarwala.