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The COVID-19 crisis has hit the residential real estate sector hard. Prices of properties across some of the costliest cities such as Mumbai have corrected at least 10-15%, according to various reports. Also, sales in the first half of 2020 declined 49% across the top seven cities compared with the same period last year, according to a report by ANAROCK Property Consultants. In order to revive demand, developers have been offering discounts and schemes to buyers. But have prices bottomed out or does it make sense for homebuyers to wait a little more before buying that dream home? Renu Yadav asked experts
Chief executive officer, Motilal Oswal Real Estate Funds
Mid-income, luxury sectors may see more price reduction
As the impact of COVID-19 unfolds, developers will prioritize cash flows over profitability. Post COVID-19, the impact on pricing will be different based on the market and type of projects. The highest impact will be seen in the luxury segment, as discretionary spending reduces. For example, central and south Mumbai have already witnessed price cuts of 10-15% in such projects in the last few months. This trend may continue as developers focus on cash flows.
There are many mid-income (in the range of ₹40 lakh- ₹80 lakh) projects in cities like Hyderabad, Bengaluru, Chennai and Pune. In this segment, more than a price reduction, multiple sales schemes and payment plans are the primary drivers for sales. So, we may not see a lot of direct price cuts in this segment.
The low-income housing segment (below ₹40 lakh) has witnessed the highest impact due to COVID-19. The ticket sizes already being affordable, price cuts will not be a major driver to bring back demand. This segment will depend more on economic recovery.
Managing director, residential services, Savills India
Low supply will help balance demand and stabilize prices
Since the global financial crisis in 2008 up till the present COVID-19 situation, the real estate sector had been under tremendous pressure. Prices have either softened in certain markets or remained stagnant, which in an inflationary economy means a price correction.
Given the uncertainty around the current crisis, one cannot rule out further price corrections in the near to mid-term.
However, one should not forget that certain fundamentals could help in maintaining the current price levels even during such circumstances. For instance, new primary launches are likely to remain muted leading to overall (demand-supply) balancing of the market. Prime micro-markets will remain resilient to further price decline as transaction activity is not necessarily a reflection of low demand.
In fact, fence-sitters and opportunistic buyers, who had put investments on hold due to high prices, will fast-track their buying decisions, leveraging the low prices on offer during this period.
Managing director, Liases Foras
More discounts likely to match the affordability of homebuyers
We have seen softening of real estate prices. During our recent survey, developers are seen to have doled out several offers ranging from offering cash discount, waiving of GST and stamp duty and subvention schemes. These discounts are in the range of 5% to 20%, with average correction at 6% across the top eight cities in India.
Higher correction can be seen in the luxury segment—of 15-16%—while the mid and affordable housing projects may see a correction of up to 10%.
The country is still in partial lockdown, and real estate activities haven’t resumed fully. Only 30-40% of projects have begun construction with limited labour force. Insecurities arising out of job losses and salary cuts has created uncertainties in the mind of buyers, which has impacted the demand.
The discounts and offers are seen in only 30% of the projects across these cities. It has not happened across the board. We anticipate a further 10-12% price correction across the board to bring in the parity in prices and affordability.
Executive director, IIFL Wealth and Asset Management
Time to buy, as ownership cost has reduced substantially
Property prices have already softened with 25-30% correction in high-end markets like Mumbai. The fall in prices has been triggered mainly by the resale market. Primary prices have not witnessed many corrections. The affordable categories and places like Bengaluru have shown more resilience.
There is the opportunistic activity as buyers with adequate liquidity are considering investments. The cost of ownership is perhaps lowest in a decade and EMIs have come down to almost ₹700 per lakh from ₹1,000 per lakh.
It is a good time to buy the residential property. People may postpone buying right now but as the situation stabilizes, we expect renewed interest in residential property.
With work from home becoming popular, some may now opt to settle away from their offices in a relatively larger house.
We are seeing price correction after a prolonged period of range-bound movement. Most of the fall in prices has already taken place and some places may see a minor downside.