August 18, 2023

Indian Real Estate Industry: Opportunities for Buyers Amidst COVID-19

The Indian real estate industry is facing a significant price correction for the first time in a decade due to the impact of the coronavirus pandemic. The already struggling sector, burdened with issues such as a liquidity crisis, high unsold inventory, and subdued demand, has been further hit by the lockdown measures implemented across the country. However, every crisis presents opportunities, and in this case, it is beneficial for both home buyers and cash-starved real estate developers.

Real estate developers with unsold inventory are now under immense pressure to generate cash flows to survive the unprecedented crisis. This has led to the possibility of discounted prices for buyers. Despite the lending and shadow banking fiasco, property prices in markets across India have remained stable.

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A recent report reveals that the nine major real estate markets in India have a staggering USD 80 billion worth of unsold residential units. It is estimated that it could take approximately 4-5 years to sell this inventory. To support the real estate industry, the central government and RBI have introduced multiple monetary and structural policies, such as last-mile funding, repo rate reduction, and liquidity infusion.

Expected Price Corrections in Various Segments

Industry experts and consulting firms anticipate a correction of 10-20 percent in luxury property prices (priced at INR 2.5 crore and above), depending on the location, city, and demand-supply situation. In the mid-segment (properties priced between INR 1 crore to INR 1.5 crore), developers are offering freebies instead of direct discounts, leading to a slight correction. The affordable segment may witness a moderate price reduction of 5 percent.

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According to HDFC Securities, big non-banking finance companies (NBFCs) are expecting a further 20-25 percent price correction in unsold residential inventory and a 25-30 percent decrease in volume for the financial year 2020-21. Coupled with fiscal incentives like stamp duty waivers, this correction is expected to revive demand and result in market consolidation among a few large organized players with a strong balance sheet and access to bank funding. Joint venture development models will see a surge, while the land buying process is expected to face delays. Developers will prioritize the completion of stalled or incomplete residential projects, putting new launches on hold for the time being.

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Boosting Demand in the Mid-Segment

Developers are focusing on mid-segment property buyers, where no major price correction is expected. Instead, they are offering freebies and attractive schemes to stimulate demand. Some builders are going a step further by offering deferred payment plans and free corona insurance to address buyers’ fears of job losses or a decline in property value. They are also providing a price guarantee option, assuring buyers that if prices come down within a few months or if the buyer loses their job, the developers will buy back the property and offer 6 percent interest on the amount.

These schemes aim to alleviate concerns about job security, property value erosion, and contracting COVID-19. For instance, Godrej Properties offers a 10:90 payment option, where buyers pay 10 percent upfront and the remaining 90 percent at the time of possession.

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A Shift in Market Dynamics: A Buyers’ Market

The combination of steep price corrections and external economic forces has transformed the market from a sellers’ market to a buyers’ market. It is an opportune time for those looking to invest in real estate. With discounted prices and attractive schemes being offered, prospective buyers can explore the available options.

Frequently Asked Questions

1. How has the Indian real estate industry been impacted by the COVID-19 pandemic?

The Indian real estate industry is experiencing a significant price correction due to the COVID-19 pandemic. The lockdown measures and the economic impact of the pandemic have added to the challenges already faced by the sector.

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2. Are there any opportunities for buyers in the current market?

Yes, the current market presents opportunities for buyers. Real estate developers, facing liquidity issues and unsold inventory, may be forced to sell at discounted prices. Additionally, developers are offering attractive schemes and incentives to boost demand.

3. What are the expected price corrections in different segments of the real estate market?

Luxury properties (priced at INR 2.5 crore and above) may witness a correction of 10-20 percent, while the mid-segment properties (INR 1 crore to INR 1.5 crore) may experience a slight correction with developers offering freebies. The affordable segment may witness a moderate price reduction of 5 percent.

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4. What measures have been taken by the government and RBI to support the real estate industry?

The government and RBI have implemented various monetary and structural policies to support the real estate industry. These include last-mile funding, repo rate reduction, and liquidity infusion, among others.

5. How long is it estimated to take to sell the unsold residential inventory in India?

The unsold residential inventory in India is estimated to take about 4-5 years to sell.

6. What changes are expected in the real estate market amidst the COVID-19 crisis?

There will likely be market consolidation among a few large organized players with a strong balance sheet and access to bank funding. Joint venture development models will surge, while the land buying process may face delays. Developers will prioritize completing stalled or incomplete residential projects.

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7. How has the market dynamics shifted from a sellers’ market to a buyers’ market?

Steep price corrections and external economic forces have shifted the market dynamics, making it favorable for buyers. Discounted prices, attractive schemes, and incentives offered by developers have created ample opportunities for prospective buyers.

It’s an opportune time to explore the real estate market and make informed investment decisions.

Conclusion:

The Indian real estate industry is currently undergoing a significant price correction, presenting a unique opportunity for buyers. The economic impact of the COVID-19 pandemic, coupled with existing challenges faced by the sector, has resulted in discounted property prices and attractive schemes. Luxury properties are expected to witness a correction of 10-20 percent, while the mid-segment may experience slight adjustments with the offer of freebies. In the affordable segment, a moderate price reduction of 5 percent is expected.

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Government and RBI policies are being implemented to support the industry, and the market is likely to consolidate among a few large players with strong financial standing. Joint venture developments will increase, while new launches may be delayed. Developers are focusing on mid-segment buyers, offering deferred payment plans and corona insurance to address concerns about job security and property value. The market dynamics have shifted to a buyers’ market, providing an ideal opportunity for those interested in real estate investment.

Take advantage of the current market conditions and make an informed decision to fulfill your real estate goals.

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