Although the impact of Coronavirus-induced economic difficulties is limited to an extent, the second wave of COVID-19 pandemic is likely to create problematic ripples to a heavy extent.
According to a Reuters poll unveiled in May 2021, the disastrous impact of COVID-19 second wave in Asia’s third-largest economy will crush the demand to an extent, making the price growth stagnant and offsetting the benefits offered by the government in the form of subsidies and incentives to the real estate developers. Many analysts predicted a 1.3% average growth in property prices due to these adverse effects.
Recent research by QuantEco Research also highlighted the point that the devastating impact of the second wave would hit the Indian economy prompting people to save rather than spend. Owing to the increased property rates, the demand for even low-budget homes would be subdued in the period that follows the second and third waves in India. Thereby, adversely affecting the rates of properties as well.
Even though the first wave made barely any impact on the importance of housing ownership against other assets in the events of the pandemic. This acted as a propelling factor for the housing demands. The second wave will in fact disrupt this demand momentum caused by the first wave.
Meanwhile, the pandemic has led to an increase in the prices of essential raw materials like steel bars, cement, plastic, man-made polymers etc. This spike has been putting a lot of pressure on builders to hike the prices of new projects and the shortage in supplies has been making things worse.
“In the last three months, iron prices have increased by approximately Rs 20,000/tonne, which is almost a rise by 50%. Apart from this, copper and aluminium prices have also increased leading to a rise in construction costs. In times like this when the real estate industry is already under the pressure of second wave and lockdown restrictions, the rise in raw materials prices will put a halt on the recovery of the real estate sector,” said Ashok Mohanni, President of NAREDCO-Maharashtra.
Although there was a slight pick-up in home sales during January-March 2021 period, India’s housing market has shown almost flat price growth. However, housing sectors of Ahmedabad and Hyderabad witnessed a 5% annual appraisal in prices, this growth can however be attributed to the fact that the average rates of properties in this market are already quite lower as compared to other parts of the city.
While the chances of price appreciation or depreciation in the near future is still not visible, it is wise for investors to park their money in real estate in the present scenario at competitive rates, given the fact that housing finance is still available at affordable prices points. A considerable amount of time will surely take for the market to get stable, by that time investors must take a note of the construction status and keep an eye on the state of liquidity of developers so as to make the best choice in the present scenario.