There’s been debate on exactly where the housing market is headed in the post-COVID-19 environment. If you’re among the ones who time the market by monitoring mortgage rate changes, so as to pounce at the first opportunity of a good deal, you may get one soon. With the market being unpredictable, the economy on a decline, many who’ve managed to build a small nest, are exploring options to buy rather than rent.
Experts say it’s a great time to buy a house in India
The COVID-19 crisis has dealt a major blow to the real estate sector. While the home buying cycle has been impacted to a great extent, buyers’ sentiments remain unchanged. According to a recent survey by 99acres.com, close to 60% of the Indian homebuyers who were looking to buy a house before the pandemic, are still planning to buy their homes within a year. However, 40% of buyers have postponed their plans. Experts, however, are of the opinion that this might be the best time to buy a house in India. With interest rates for housing loans having gone down, and prices of houses not being too high, now is a perfect time, say experts. They further warn that prices might go up in the ensuing months due to an increase in the sales velocity, and so you need to act soon.
Ankit Jain, a realtor who has been in the housing business for 12 years tells Bingedaily, “Prices have dropped at least 15 to 25 % in some cases. Developers are offering good payment plans like 25: 75 or EMI holidays. The home loan interest rates have dropped too. The housing industry in India is seeing good demand from people who are overseas.”
Market rate will take a while to recover
A common conundrum which you must have experienced yourself is whether to buy or rent a house. Homebuyers wrestle with this core financial decision and the local housing market is what controls it. While the real estate industry has been battered, experts say it might pick up within a year. They predict that as the Covid19 situation and the economy improves, homebuyers will be more forthcoming.
A study by Savills India says the market will take a while to recover and steady itself in the second half of 2021. While housing demands were muted during the lockdown, queries on new purchases are returning gradually. “What we have also observed is that actual users are leaving their offer prices with sellers hoping to close their deals on new benchmarks. On the supply side, both developers and sellers are in a wait-and-watch mode, evaluating the situation to make informed decisions on their way forward,” says the Managing Director of Residential Services, Savills India.
“Covid19 has paved the way for new opportunities as far as housing is concerned”
The lockdown brought the industry to a standstill position and the recovery curve would depend on the fiscal stimulus rolled out by the government, said experts. “As gradual recovery begins with improvement on this pandemic and things settle over a 12-24 month time horizon, we will see a long drawn extended U-shaped recovery for the residential segment but a faster V-shaped recovery for the office segment in the country. Sentiments perhaps may return earlier,” said Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure.
Though Ankit Jain thinks otherwise. “Covid19 has paved the way for new opportunities. Now that one gets home loans at a cheaper rate, developers have found a new payment plan. This new plan entails that the buyer doesn’t have to pay EMI for a certain period of years, only interest. Developers have already started making plans to add a library and business centre facilities as part of their amenities and also plan houses in such a way that a separate workspace can be created. We are evolving our housing ideas along with Covid19.”
Suburbs or metro cities?
Forbes highlighted another complication that buyers face - selling a house! Experts say if you’re looking to trade-up or make a move to a new location, it may be a good time to sell your current home now more than ever. Many sellers either removed their properties from the market, once the pandemic unfolded. Some even chose not to list them at all. This has made inventory in markets tight, and thus, if you decide to sell your house, you may end up getting a great price. Along with this, you may even be fortunate enough to get a buyer soon, considering there aren’t many putting up their houses for sale.
There is also another emerging angle, which is the work-from-home culture. Many are now opting for spacious homes in the suburbs since daily commuting to the office is not a prerequisite. While the norm previously was settling in a small home in close proximity to the office, this has changed. People now want to go in for spaced-out homes which are cheaper. Companies have also started realising that lower travelling time means more productivity.
Thus, while the suburbs seem a favourable location for a home in the near future, Ankit Jain says even the metro cities such as Mumbai would be a good bet. “There are various infrastructure projects being undertaken by the government. These will facilitate connectivity in the city, and even if you’re buying a house in a distant suburb as it fits your budget, you will be in close proximity to the life of the city.”
Site visits have become virtual
A recent survey by 99acres.com revealed that (31%) respondents still believe real estate the best option to invest, followed by fixed deposit (24%), gold (24%), and stock market (21%). Even as industry experts foresee prospective demand for the residential properties, homebuyers are sceptical and hesitant to lock deals over virtual site tours. While this was a nascent growing technology pre-Corona, it is gaining immense traction in these times of lockdown. Perhaps even once the lockdown has been lifted, buyers will opt for a virtual house tour to minimise contact.
Ankit underlines the stringent safety protocols put in place on-site, should buyers choose to opt for the traditional mode of surveying the plot. “Some still choose to visit sites, and the due safety and precautions have been taken care of by the developers. Yes, some developers suggest a virtual meeting with the client, by way of which they can explain the project plan, and give them a virtual house tour. However, who’d want to buy a house solely based on a virtual tour?”
“When things seem serious, a physical visit is preferred. On a set date and time, limited number of the family members are allowed a direct walk-in. It important to understand not all Indians will buy a house online, they need to have the ‘feel’ of home.”
“For these on-site visits, sanitation protocols are in the lieu. Everyone is expected to wear a mask, their temperature is checked, hand sanitizers are provided, if they go around touching surfaces, these are cleaned later. Some developers also use the Arogya Setu app and make sure the managers on-site are on a rotational basis. Construction labourers and workers have to follow the same protocol since most of them stay on-site.”
“Demand will increase in the affordable segment”
Experts believe that there is scope for a price correction in the luxury segment and there might be some deleveraging by developers to improve the cash flow. However, 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 have created uncertainties in the mind of buyers, which has impacted the demand. This may impact price correction in the affordable segment. Developers whose project/s have done well and are almost sold out will not slash prices, especially if they have the financial strength to wait it out. However, those with ample unsold inventory may reconsider their prices.
Finally, as Ankit speaks of what the future in housing, spells, he says, “The demand in the affordable segment will definitely increase since people understand the value of having their own home. Luxury apartments might not generate that kind of demand. I foresee places like Thane, Kalyan and far east suburbs to see an increase in demand.”
As far as negotiating house rates goes, he says “If there is a serious buyer, the reduction in pricing is possible. However, I’d like to reemphasize the fact that just because of the pandemic, developers and buyers shouldn't take undue advantage of each other. There should be fairness. If you’re serious, you get a good deal.”
Ankit Jain is a realtor based in Mumbai. He consults at Property Services, Office no 5, 2nd floor, Rahimtoola House, 7, Homji Street, Fort, Mumbai 400001. You can also email him your queries at firstname.lastname@example.org