Upper East

Why Invest In Real Estate Amidst COVID-19?

With more than 15 lakh cases and 19k plus deaths, the coronavirus pandemic has shaken the Indian Economy. Various industries including agriculture, education, food, and supply chain management have been severely affected. The real estate market too experienced a downgrade in property sales. This blog gives a brief on the key elements of the state of the real estate market in this pandemic. It will highlight topics as:

  1. The current state of real estate in India
  2. Investment opportunity in crisis
  3. Future predictions by experts

Current position of real estate - India

• The price drop in real estate

The coronavirus pandemic has compelled real estate developers to offer discounts and better packages to enrich their sales. It is estimated that the housing revenues have dropped down by 75 percent after the fatal COVID-19 took over the nation. Union minister Piyush Goyal also asked the developers to not depend on the government to bail them out. “We are trying for some concession but if not, you will have to sell. Now, it is up to you. I cannot be more explicit about it. But unless you reduce your rate, believe me, you’re stuck with your material,” said the union minister.
The leading banker Uday Kotak also added “They should not be looking at the rear-view mirror while driving a car, but looking in front. If the prices drop, people who have not bought homes for decades will do so.” Even HDFC chairman – Deepak Parekh advised real estate developers to offload their stocks as he expects a 20 percent drop in property prices of unsold residential inventory. He stated, “Prices of real estate have to come down, and will come down.”
Experts also predict that developers may offer GST and stamp duty waivers or additional gadgets as a medium to boost their sales. They also predict the Luxury residential real estate market in Mumbai to experience a dip by 5 percent. The demand for ready-to-move-in homes has significantly increased as compared to the ones under construction. Due to the social distancing and other preventive measures issued by the government, the construction work has taken a halt. The public is well-aware of this situation and is fearful of the timely completion of real estate projects. Ready-to-move-in homes are currently trending and believed to be the best investment opportunity in these times. If you are looking for safe and credential residential real estate investment, then Prima Terra would help you get through the process effectively.

• Digital sales

The coronavirus pandemic has compelled the nation to stay at home. This state of emergency has, however, given rise to the use of the digital platform to grow real estate sales. Real estate companies are now strengthening their digital game to promote their listings to a majority of the audience. The internet has now enabled consumers to view a site online and move forward with the purchase. Moving to an online platform is believed to bring a rise in sales and lead generation as well. A website with clear property images, mentioned amenities and locations are also well appreciated by people.
Developers are now believed to be focusing on digital marketing strategies to up their game against their competitors. The availability of online payment options also forges a change in the traditional method of purchasing real estate. A report by Magicbricks PropIndex stated that consumer searches had witnessed a 5.3 percent growth during the first quarter of 2020 and that small size and ready-to-move-in units were trending throughout.

Investment Opportunity

• Sense of Security in chaos

The sense of security that an owned physical asset can provide during these times of emergency and chaos has led the millennials to choose the path of real estate investment. Experts also suggest that property ownership has now become a priority rather than an optional investment. The uncertainties like the pandemic which trigger loss of employment, lack of food, and no means of travel, make lives more difficult for the rent payers. Purchasing a home ensures a secure shelter with less worry about increasing expenses.

• Bank drop repo rates

Repo rate is the rate at which the central bank lends money to the other commercial banks. The Reserve Bank of India recently responded to the COVID-19 crisis by reducing the repo rates to 4 percent. A fall in repo rates allows commercial banks to reduce their interest rates on lending. This reduced rate on lending will further allow the EMI on the consumer’s loan to decrease. The loan EMI’s are believed to get cheaper especially home loans that are linked to the repo rate.
For borrowers whose loans are linked to repo rate can expect a decline in their EMI’s in the next three months. This is because as per RBI’s circular on linking of loan interest rates to an external benchmark dated September 4, 2019, the rates have to be reviewed and reset by banks at least once every three months. Therefore, today’s rate cut will lower a borrower’s EMI outgo in the next three months.
For borrowers whose loans are linked to the MCLR will benefit only when their bank reduces loan rates as MCLR is dependent on external factors such as rate cut and also on the internal factors of the bank.
The Finance Minister, Nirmala Sitharaman in the Atmanirbhar Bharat Package, announced the extension of credit linked subsidy scheme (CLSS) under Pradhan Mantri Awas Yojana till March 2021. This package will make new loans cheaper too.

The future of real estate post COVID-19

Experts believe the demand for real estate will rise after the pandemic has settled down. People realizing the value of an owned real estate asset will likely want to purchase a safe and secure house with a clean and hygienic environment. They also expect a rise in properties with gated community plots as they enhance more security and safety. Digitization will become a major element of real estate investment to reach a potential buyer, thereby enriching the real estate sector.
Numerous situations are expected to arise post-COVID-19, however, the one advice that remains constant from the experts is that this is the right time to invest in property. This time of crisis is fortunately believed to be the best time of buying a property due to the favorable circumstances. Millennials especially are bound to purchase new homes to efficiently tackle a possible crisis situation in the future. The use of the digital platform to promote the sales of real estate will inadvertently increase the involvement of technology in the real estate business.