Housing Market Recovery: Where, When, And How?

Housing Market Recovery

Housing Market Recovery: Where, When, And How?

Housing Market Recovery

After the second Covid-19 wave, India’s housing market has recovered, stretching the healthcare infrastructure far beyond its capacity, not only in major cities but also in rural areas. Even the most developed nations, including the United States, would have crumbled in the face of such ferocity.

Despite the ongoing restrictions, the majority of state governments have permitted critical economic activity, including construction. There are good reasons for this: not only does real estate contribute up to 7-8% of India’s GDP, but more than 50 million Indian workers rely on construction for a living. Furthermore, there is still a high demand for housing, and the government cannot afford to lose the revenue generated by property registrations.

Following the first wave, residential real estate recovery has accelerated, as seen in the last two quarters. The increased demand far exceeded expectations. Housing demand in the twenty-first century has become a mash-up of several factors.

Many first-time homebuyers are entering the market, and many existing homeowners want to upgrade to larger homes so that they can work from home comfortably. Many people are looking to relocate to (or buy second homes in) outlying areas where they can afford larger homes and live and work from home with their families in a more secure environment.

As a result, the housing recovery will be the fastest among all sectors following the second wave. If a convincing downward trend in cases continues and vaccines are widely distributed, we may see some green shoots as early as the third quarter of the fiscal year 2021.

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Which budget category will recover fastest?

The luxury housing segment performed exceptionally well last year because the pandemic’s impact on this income class was minimal. Because of the discounts and offers available, many luxury home buyers sensed an opportune time. This time, too, the second wave will have a greater short-term impact on the affordable and middle-income segments.

With the second wave, the coronavirus has spread to younger age groups, including many middle-class residents. While there is ongoing demand from the middle class’s upper-income bands, overall priorities are currently skewed toward cash preservation to meet potential medical emergencies.

In terms of recovery, the middle and upper-middle-income housing segments will recover the fastest. When the number of cases decreases and the economic impact of the pandemic subsides, middle-income homebuyers will return to the market in search of value.

Impact on property prices

Due to the second wave of the housing market slowdown, price correction is likely. The reality is that if the current rising inflationary trends continue, developers will be forced to raise property prices. While demand is low, operating costs for developers have already skyrocketed during the second wave.

Larger companies are providing additional safety protocols to workers, including vaccinations and other medical needs. Furthermore, raw material costs such as cement, steel, and even labor have all risen in recent years. This will eventually force developers to pass on the additional costs to homebuyers.

Larger homes – still in demand

Developers are unlikely to reduce home sizes in new projects in order to make them more affordable. Looking at the current Housing Market, larger size homes remain the top preference of homebuyers today. Though Covid-19 cases may be on the decline, the work-from-home trend is likely to continue in the future, with many businesses adopting a hybrid model.

Often, businesses use rostered work in which employees work some days from home, other days at office. In short, the demand for larger homes will continue, so there is little reason to build smaller units.

Developers have become cautious, and many are deferring new product launches until a better time comes. Those with financial means are continuing to build on the ground. Because ready-to-move-in homes are in high demand, there is a compelling case for completing housing projects.

Overall, the second Covid-19 wave is not a doomsday scenario for real estate. Demand may be slow for a few months, but it will pick up again as soon as the cases subside.

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