Impact of COVID on the Ecosystem of Real Estate market in 2022

Pune, 13th January 2022: We have entered the year 2022 now. India has been hit hard by the pandemic, particularly during the second wave of the Coronavirus in the spring of 2021. The sharp drop in GDP is the highest in the country’s history, and now we are currently suffering from the 3rd wave. We still don’t know how many times and years we all will have to fight this.

For the last three years, we spoke enough about the virus. Considering my expertise in real estate, let’s talk about the real estate market and available opportunities.

Impacts on Real Estate industry:

We have seen a sudden increase in the residential real estate market. Everyone has realised that our own house is the most secure place on Earth. Apart from that, considering the current market scenario and third wave, the work from home concept could be the major game changer for increasing demand for residential properties. We can see the price rise in a few cities like Pune, Ahmedabad, Bangalore, and Hyderabad.

At the same time, the commercial market is still struggling for survival. There are huge spaces vacant due to work from home (WFH). Post pandemic, the majority of commercial spaces are waiting for things to get back to normal.

Impact on Homebuyers

The buyers who bought under-construction properties in the recent past are suffering from delayed possession due to pandemics. Reduced home loan rates are another booster for buying a new house. The majority of people are upgrading their homes and looking for extra space with a better lifestyle.

Impact on Sellers

Considering the sudden demand in the residential market, cash flow has increased. Large inventory, especially 4/ 5 BHK apartments or villa or bungalow projects have witnessed more demand than earlier. There is a 88% hike in larger inventory, as compared to the year 2019. Commercial projects are unfortunately still struggling for sales, considering the current market scenario.

We have seen price hikes on a national level, especially in the residential market. Government initiatives, resulting in reduced home loan interest rates and post first unlock cut down in stamp duty by the government has boosted the sale of residential property.

New UDCR: The Unified Development Control and Promotion Regulations has come up with better clarity, which is more beneficial for the builder and developer lobby in terms of additional FSI and premium.

The redeeming feature of the Unified DCR is the notable relaxation in floor space index (FSI) eligibility and the provision for loading a significant amount of additional FSI for a project. To enable this, the concept of ancillary FSI, modeled along the lines of fungible FSI in the BMC, has now been introduced in eligible cities across the state.

Impact on an Investor:

Considering the overall scenario, the property value will always increase over time, especially after the pandemic. So, it is safe to say that acquiring real estate properties now in preparation for the post-pandemic times is a good strategy and is a sure-fire beneficial for the investors. Especially, the under-construction commercial properties, which have less momentum are most profitable for an Investor who can take a calculated risk and invest in Real Estate.

Impact on Real Estate agents

During the pandemic majority of salespeople have lost their job, hence there is suddenly an increase in the number of channel partners in the market. Also, the sector has seen newcomers from different segments, like banking, insurance, and the automobile industry, because entry-level to become a channel partner is very easy.

The majority of small developers and those who have less expertise in selling have started outsourcing their entire sales and marketing job to institutional channel partners, who have a bigger team and expertise to sell more in today’s market.

Impact on Government:

The maximum number of registration happened during the first unlock up till now. The government managed to recover the majority of revenue through stamp duty and GST

The Unified Development Control and Promotion Regulations for Maharashtra state, which came into effect in December 2020 and have injected much-needed positivity in the state’s real-estate sector.

Impact on Banking

Post pandemic there is a lot of pressure on the lending side as the banks have not been able to lend aggressively during the 2 waves. The banks had to stress paying interest on savings accounts and FD. The same was not getting compensated on the lending side due to low demand for loans.

Now with the market improving, banks want to lend aggressively and support the real estate business which looks promising after people need bigger homes as work from home culture is also fueling the demand.

Considering the overall impact on each sector, we can see good momentum in the coming days and years in real estate. Till the time 2025, the overall real estate market will be on a big high, especially cities like Pune, Banglore, Hyderabad, Ahmedabad has huge potential in terms of real growth stories. Post RERA and pandemic, day by day real estate is becoming more transparent and more structured. This will surely benefit all who are part of the Indian real estate ecosystem.

  (Umesh Pawar is the Founder and CEO of Dream Works Realty LLP, a real estate investment advisory company based out of Bavdhan, Pune. He writes blogs and articles on the real estate sector and often participates in talk shows on the issue on prominent news channels.)