Impact of COVID-19 on Dynamics of Indian Housing Markets

By : 360 Realtors

24 March, 2020

The world is wrestling with the bane of COVID-19, a virus that has lead to over 8,000 causalities. Originating in the Wuhan district of China, it has crossed beyond the Chinese boundaries & made its way around the world spreading at a mercurial rate. It has had a significantly adverse impact on Europe as well, with major economies such as Spain & Italy forced into a nationwide lockdown. The ramifications of COVID-19 are also visible in regions such as Northern America, Far East, South East Asia, Iran & the Middle East. With India also registering 190 positive cases of COVID, it seems apparent that if the crisis is not brought under control, it might widen in proportions.

Such a major crisis is also having a wide-scale impact on the global economy.

As Chinese manufacturing has been badly hit, the global supply chain has been disrupted. The negative impact of the disruption is expected to reverberate around the globe. Likewise, tourism & retail are some of the worst-hit sectors around the globe as revenues have plummeted drastically in the past few weeks.

Amidst such a mounting crisis, it is unlikely that India, which is already reeling from an economic slowdown & liquidity crunch, will remain unscathed. The downtrends are also visible in the housing markets, which are marked by a slowdown in site visits, transaction volumes & new launches due to the current situation. There is a visible contingency fuelled by the tide of information (many of which are also fed by unscientific claims), which is playing a major role in undermining the realty sector.

It will take some time to analyse & evaluate the exact long-term impact of COVID on the Indian housing markets. If the crisis does not show signs of abating, it might trigger a further crisis. Delays in buying decisions, dwindling demand & slowdown in investment might unfold.

However, the current COVID-induced crisis is not bereft of hidden opportunities for the sector. Earlier as well, the sector has shown resilience & successfully absorbed many shockwaves such as RERA, Demonetization, GST implementation, the NBFC crisis, etc. In the medium term, many investors & buyers might pivot to the sector in larger volumes, as Real Estate is believed to be a safe asset class to invest. As the stock markets have slumped in India, a tangible asset such as Real Estate becomes a natural choice for many buyers & investors to park their capital.

After the outbreak of the COVID, factories across the country have shut down, resulting in the collapse of manufacturing & export. The economic growth forecast has been revised to 2.9% from an earlier estimate of 4.8% for China by S&P. This might be an opportune time for Indian manufacturers & exporters to fill in the current gaps in the global trade flows. Through targeted efforts both from the public & the private organizations, the Indian manufacturing sector can be set for growth & enabled to deepen its foothold in the global supply chain. This will also help in economic growth in the country & positively impact the Real estate demand.