Real estate industry may take up to a year to recover, says study

‘Buyers will go in for smart homes and integrated townships in post-COVID-19 world’

The battered and bruised real estate industry will take about a year to get back on its feet, according to a recent study.

The demand for residential real estate could show signs ofpick-up in six to 12 months once the pandemic settles, and buyers will prefer smart homes and integrated townships in the post-COVID-19 world, according to the research paper by Savills India.

Despite the gloom, about one-fifth of buyers (21%) may return to the market in six to 12 months, as per the sentiment witnessed in May. “Though a minor segment, this could still be a reason for light at the end of the tunnel,” the report said.

However, a significant 70% do not plan to purchase a home within 12 months. Similarly, most investors prefer to wait and watch, with almost 94% planning to take a decision after 12 months.

Analysing the residential market in the past decade to fully understand the decline, recovery and growth patterns, the report said the lockdown struck just when the residential market was growing for the second consecutive year in 2019. “COVID-19 has brought it [residential real estate] to a standstill in 2020,” it said.

Homes with work areas

According to the findings, 80% end-users and 90% investors would prefer homes that are smart and come with carved-out work areas as work from home will be the norm. Integrated townships too will be in demand.

At least 30% end-users and investors showed willingness to pay a premium for homes that would incorporate a wellness concept.

This indicates the design trend in the post-COVID-19 world. “Homes with carved out office-like workplaces would be attractive to nearly 24% of end-users,” it said.

There is also interest in second homes, and nearly 30% of such buyers said they would be interested in locations in Goa. About the same number showed interest in properties in the hills.

On the recovery, the report said end-users in the country’s top six cities are likely to return to the market quickly after the COVID-19 pandemic, as compared to those in tier-II and tier-III cities.

The way ahead

The future will depend on continuing policy support and economic stabilisation, and it may take until the second half of 2021 for the markets to be steady, it said. Shveta Jain, managing director, residential services, Savills India, said housing demand remained muted during the lockdown but with restrictions gradually being lifted, queries on new purchases started to return.

“What we have also observed is that actual users are leaving their offer prices with sellers hoping to close their deals on new benchmarks. On the supply side, both developers and sellers are in a wait-and-watch mode, evaluating the situation to take informed decisions on their way forward,” Ms. Jain said.

The prolonged lockdown has caused financial disruptions across sectors, not just real estate, she said. “As far as the residential segment is concerned, transaction volumes will be impacted in the near future. However, certain sections of the buyers could use this as an opportunity to build their real estate portfolios,” Ms. Jain said.

On the pricing trend in metros, which have been severely impacted by COVID-19 outbreak, she said, “Given the current circumstances and weak market sentiment, housing prices are likely to soften or remain stagnant depending on the location, quality of projects and financial situation of developers.”

Prices could drop in single digits in certain markets where there is oversupply. “In locations where there are quality projects built by developers which are not stressed, we do not see any price correction,” she said.

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Printable version | Jul 8, 2020 12:23:44 AM |

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