Will Real Estate Prices Drop Amid COVID 19

Will Real Estate Prices Drop Amid COVID 19?

The real estate market is preferred as one of the best investments and capitalizations an individual can make. Experts said it offers relatively lower risks and offers greater scope for diversification. In uncertain times also it provides for an income stream.

In the wake of the recent COVID 19 pandemic, the big question on every potential home buyer’s mind, especially in big cities that whether residential real estate prices would fall which could make a property more affordable. But, despite the near-constant demand, extensive inventories and series of reserve bank rate cuts, for buyers, real estate prices have remained out-of-bound.

Price Analysis

The nine major Indian residential markets that include Ahmedabad, Bengaluru, Chennai, Gurugram,  Hyderabad,  Kolkata, MMR, Noida, Pune registered negligible price growth. While the price movements in cities like Hyderabad and Pune have not been significant upward or downward however a healthy appreciation has occurred over the years. In MMR, property prices which were already considerably higher than the national average, the price increase was slow but remained steady. The housing markets in the capital region and Chennai have undergone limited growth.

As for the future, people who expect a decline in the medium to long term property prices may be disappointed. Because based on some factors, property values are likely to show an upward movement in the post-Corona pandemic. 

Government Measures 

Project delays are on the cards as a supply of building construction materials that India imports from China is stuck in the wake of the pandemic as housing projects which rely heavily on supplies of fixtures and furnishings from China. The time gap would not only delay housing projects but eventually also raise the overall costs of construction projects as builders would have to rely on alternatives to meet their construction demands.

The centre’s ‘Make in India’ initiative might get a boost from this challenging situation in the medium to long term. Under such a case, dropping prices is difficult to answer.  However, the Government could take steps that could make investing in property more profitable for buyers.  Also expected that the Government would support the real estate sector, the second-largest employment generator in the country, by waiving off tax on unsold inventory.

Also, the reduced repo rate of RBI to 4%, making house loan affordable for home buyers. As a result, the interest rate on home loans is now as low as 7.75%. This will allow buyers to invest in property at a cost advantage. 

Depending upon the duration of the current COVID 19 crisis, the prices may or may not seem to decrease as the holding cost of the developers will go up while the pressure to liquidate unsold inventory will rise. The extent of price change in the almost to medium term would be predictable.

However, the Government by invoking special measures would handhold the sector in the times of crisis that create confidence in the minds of the buyers and boost real estate.

By: Shailaja K