The residential real estate market has thrived because of well-identified and fair socio-economic factors. But now is being staggered due to economic slowdown, liquidity crisis, and changing consumer preferences, culminating in low demand. In order to contend some of the hurdles principally on the liquidity aspect, the government launched the Alternative Investment Funds (AIF) to support the quarter. Nevertheless, these proposals have come short of recovering the sector from the depths of the void.
Although it is asserted that developers would cut down charges in order to clear out unsold inventory. Reckoning that developers are short of cash and bewildered by the sudden liquidity crisis, diminishing prices will add to their distress and impact business progression. Diminishing prices may influence housing stock being traded in the short-term, but it could be crushing the development of businesses and possibilities of the sector in the long run. Given that people have faced many challenges during the lockdown and a majority of them continue to work from home, it is only expected that the ready-to-move-in property will be in immense demand. The developers may not decrease the prices of such but may charge a slight premium.
From the client’s perspective, there are multiple difficulties and hurdles prevailing in the sector. Consumer confidence was sinking and the virus aggravated the condition. The current circumstances have left a large majority of people working across sectors and salary brackets, either apprehensive about their job security or awaiting salary cuts. This vagueness has led them to ‘put-off’ discretionary spend even on essentials like housing. On the other side, this has caused a greater potential for ‘rental housing’, as an alternative option. This particular segment has potential and can foresee further growth in a post-COVID-19 scenario. In the all-pervasive unpredictability and volatility, there are possibilities that more people will choose to rent houses, over purchasing a property. Even the lower strata of the workforce will see some reprieve as the government is putting in place incentives to organize affordable rental accommodation for migrant workers, where a large demand exists. So, there is hope for the sector, despite the challenges where the existing stock in the market can cater to different consumer needs.
In order to facilitate revival, the locus will have to be on the restoration of demand. Until then, there are a few things that can mean direct relief to developers. The advantage of the repo rate should be passed on to the buyers directly from the banks. They should look at alternative real estate asset modeling, from capital sale purchase to rental housing models. They should give the benefit of increased tax incentives through improved tax structures to the buyer and target Tier 2 & Tier 3 cities for progress.
