Globally, real Estate prices are soaring, and there seems to be no sign of reduction. It has been a hot market in many countries (US, UK, Australia, China, New Zealand, Germany, and Peru). In India, prices have dropped following a 6% plunge in GDP in 2020, but deals happened towards the end of the first lockdown. There has been a significant increase in the transaction in 2021, especially in the second quarter. The top 6 cities in India notably recorded the highest real estate sales, particularly in the residential segment. 

The union minister of commerce issued a statement saying that builders/developers need to sell real estate properties at a reduced price that caused a panic situation amongst the developer community. However, the price fall and increase depend on the various factors that we will shortly discuss.  

Yes, with the coronavirus pandemic, the real estate prices certainly affect India, but as discussed above, there has been a pretty good property market in 2020 & 2021. Due to the work-from-home model, there has been a substantial decline in the office assets, and many want bigger homes to adopt office space at home. According to the property managers, as the economy was tanking, people thought they might get the best deal. Thus, there has been a flip flop from the office market to the residential market segment. So, the housing markets in the NCR have improved.   

Although a few reports suggest a slight reduction in prices, overall, there were no significant upward or downward changes in real estate pricing. However, there was some price increase in Hyderabad & Ahmedabad real estate markets. On the other hand, in Mumbai, where real estate prices are always on the surge, notably higher than the national average, the growth has been significantly low. 

India is heading towards economic recovery, and the government’s supportive policies in the form of subsidies and incentives is an added advantage for real estate purchasing.    

Reuters poll of property analysts:  

Let’s dive into the past, tally & check the real estate prices and income in different sectors. The housing affordability in India since 2015 was quite good, and the incomes(yearly) have been increasing while the real estate price has been fair & stable. This shows where we are heading right now and how real estate is placed in the pandemic.  

Reports suggest that in the first quarter of 2021, there was a pickup in home sales, and at the same time, the price growth has almost flattened in India’s eight prime housing markets. However, as discussed above, the housing markets of Ahmedabad & Hyderabad cities remained beyond the exceptions. There was a record of about 7 and 5 percent annual appreciation in housing prices, respectively. In Pune also there was an optimistic price growth of about 4 percent in the last one-year period.     

Coronavirus Statistics:

The second wave has taken a tremendous toll, and India was the second most affected country. The death toll significantly increased, and many active cases were recorded during that period.   

The projections in the poll laid out that the risk of coronavirus revival disrupting activity was low. There have been quite ups and downs since then, and things have always been unpredictable. At one point in time during the second wave, India was affected by the virus; nearly 22.66 million people were infected, and the most unfortunate thing was the death rate. 2,46,116 deaths occurred due to pandemics.   

Up-point of muted price growth & government steps:

The decrease in the real estate price and many other factors have boosted housing affordability to a great extent. On the other hand, the low income might damage the investor spirit and influence the foreign investing volume in the country, particularly from the NRI section. Let’s discuss the state-wise actionable insights that increased housing affordability; the Delhi government has declared a 20% decline in the circle rates for all kinds of properties. It was announced on February 5, 2021, and will be in effect until September 30, 2021, directly impacting the price rates. With this, the real estate price rate will significantly reduce for home buyers, especially in the luxury housing sector.  

Banks have also lowered the home loan interest rates, which brought about decent sales despite the general slowdowns. Reduced real estate prices do encourage the buyers & this increases sales with demand in the property purchase.  

Factors that influence the Indian real estate price growth:

The real estate price variations depend on inventory overhang; markets with low inventory will see a price spike. Mumbai, for example, has done very well in the last two quarters. The inventory overhang in the worst of the times was around 40 months. Now in some of the micro-markets, the prices have fallen flat to as low as 18 months.   

If supply is a constraint, the unsold inventory or as and when somebody puts up a new supply, there is a possibility of some price increase. But, overall, it all depends upon the kind of supply, micro-market, and city specific.  

Global real estate price:

In other parts of the globe, the market is quite hot. It has totally turned the devastating situation into the most fortunate when it comes to real estate. There have been profitable deals for the developers/seller. There have been many transactions, and there seems to be no stoppage when it comes to the price hikes also. Where every market got badly affected due to the dreaded flashes of first & second waves, the real estate sector survived.  

Global investment size is most likely to improve primarily by 15 to 20% in 2021. According to the CBRE report, America is leading in business and experiencing high real estate prices. The housing cycle is in boom internationally, and the prices are skyrocketing.  

Will there be any price increase, especially with commodity inflation?  

To sum up, the top investors foresee muted growth. Peeking through the price rates in the last two years and the price appreciation (of plots) in the previous 18 months has been phenomenal. So, there has been a 30 to 40% price increase in plots compared to the other housing formats.   

Sales trends are persistent on residential, but the 10 to 15% growth as it used to be once upon a time is not the case now. An increase in real estate prices will be much muted, which is good as there is an inventory overhang, and we need to get that out of the system.   

Except in some pockets, there seems to be a decline in real estate prices; even in plots, there seems to be no increase going forward.   

As of now, we don’t expect too much of a price increase, but the demand for the sale certainly looks better. We believe, Coronavirus brought back the attention to owning a home and are hopeful that India will reach the 4 lakh units per year in the top 7 cities sooner or later.   

Hence, there can be a slight increase, but by and large, there will be muted growth in the coming years due to a lot of unsold inventory. 

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