The impact of the COVID-19 pandemic has had an unprecedented effect on the real estate industry across the globe. The impact on Indian realty was also similar with the country facing a meltdown during 2020. Construction work had come to a sudden halt with migrant construction workers making a mass exodus back to their homes. Developers were left to face liquidity issues as homebuyers had lost interest in buying property due to a shaky income and job market scenario.

All this was secondary to the pressure the realty sector had been reeling under due to recent mega regulatory changes. These included implementation of GST, RERA, demonetisation and the ‘Benami’ property law. However, in spite of this general economic gloom in the realty sector, the residential real estate sector began to bounce back during the third quarter of 2020, registering a 173% Q0Q (quarter-on-quarter) growth across 8 major residential markets in India. This was further supported by builder’s adopting digital technology as buyers were slow to make site visits.

Recovery Phase

By end of 2020, homebuyers had started taking advantage of the lowered interest rates (below 7%) on home loans as well as the greater negotiating power with property developers. This has led to a win-win situation for both buyers as well as the sellers, who need liquidity of their assets to enable them move on to new project launches. The last quarter (Q4) is showing further recovery in the residential realty sector with Bangalore and Gurgaon leading the way. Interestingly, NRIs are also taking active interest in home-buying against the backdrop of a weakened Indian currency. Bounce back in the Indian realty sector bodes good for the country as it is the biggest employer of unskilled workers in the country.

2021 Outlook

The COVID-19 pandemic had a drastic effect on the realty sector in 2020, but things are beginning to look up now and a better 2021 is expected. The pandemic and its associated income insecurity also taught potential homebuyers the value of home ownership, hence giving a further boost to residence buying in 2021. Developers, on their part, need to move away from traditional approaches and embrace transformational strategies for greater investor interest and sustained recovery.