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COVID-19 Impact On Real Estate – Changing Demand And Supply Trends In The Island City Of Mumbai



The COVID-19 Pandemic has changed the way we live.

Every individual, family, community, company, sector, country is impacted and the real estate sector is no different. The sector has already been grappling with the challenging circumstances of the liquidity crisis; rationalization of demand and a deceleration of price growth which is driving away unorganized investors.

The sector, however, is acquainted with such predicaments. Be it the US Sub-prime crisis of 2007-08 which led to a complete global economic meltdown or the more localized impacts of GST and demonetization, the sector has always survived on the basis of two critical factors:

  1. Housing or any other form of property is a basic need
  2. The adaptability of the industry players to create solutions that suit the changing scenarios. Even though some are better than others and some are more innovative leaders, eventually everyone adapts

Markets are struggling and developers are looking at providing the right price to the home buyers, however there are times when the market can no longer afford a further dip. The ongoing pandemic situation has ensured that this is the ideal time for home-buying. According to a recent report by Anarock, over 54% of people consider ‘now’ to be an ideal time to buy a home. This is based on the fact that cash flow considerations are finding a higher priority than making higher margins. Also, in a bid to boost the economy, the Government, the RBI and the Banks are ensuring a sustained demand by providing easy access to home loans, loan against property and other credit instruments at all-time low-interest rates. 

On the supply side these changing parameters are leading to the prospect of higher momentum in home buying now: 

Fall in Inventory: As a result of the nationwide lockdown, a lot of project launches, sales and construction work has come to a standstill. Developers may not acquire new projects and will focus on selling their existing inventory. This will have a significant impact on the supply of new apartments. As the inventory starts reducing, the prices are more likely to escalate. Thus those who buy early are likely to benefit more than those who prolong their decision. These early bird price benefits are for a shorter duration and will also bring back the individual investors in to the buyer category.

Increase in Developer’s expenses: We will not witness any dramatic change in the price levels as the expenses of developers will not reduce anytime soon. This will mainly be due to the lack of government stimulus packages for the real estate sector and also because of the expensive premiums charged by town planning authorities. Furthermore, there is likely to be an increase in the cost of construction due to the prevailing lockdown. Construction workers will need to be well-equipped in their working environment, and there will be massive investments in adopting latest technology which is going to be quite expensive.

On the demand side these changing parameters are leading to the prospect of higher momentum in home buying now: 

Homeownership: Safety, security, distancing, privacy and personal space have found a new status of being extremely important and highly prioritized in the Indian dialogue since the outbreak of the pandemic. Owning a home offers a sense of security, safety and stability. Considering the current scenario, even post the lockdown, a lot of people will continue to work from home and are more likely to look at travel time to workplace and a separate room for most of the family members finding a far greater weightage in decision making. 

In conclusion, it will be prudent to state that the trends are pointing in the direction where the basic need of having a shelter of their own, availability of the right pricing of homes and access to low interest loans will lead to a narrowing of the demand – supply gap. While the industry is most likely to benefit from this, it is also the almost perfect time for home buyers, investors to get in and make the right decision now.

By Mr Rohit Kadam, Group General Counsel, Sugee Group

DISCLAIMER: The views expressed are solely of the author and does not necessarily subscribe to it. shall not be responsible for any damage caused to any person/organisation directly or indirectly.

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