Property prices in India likely to fall as a result of COVID-19

By : 360 Realtors

14 April, 2020

Although it is bad news for the developers, there is still a ray of light for homebuyers in the current situation. As the market is on the suppressed side, property prices in India are expected to decrease soon. It is also likely that property prices would fall by up to 10% to 20%, while land rates would decrease by up to 30%. This would turn the real estate sector into a buyers’ market. In order to stay in the competition, the developers will be forced to lower the prices. This would be the first such price correction in a decade.

As a result of businesses across the country shutting down due to the pandemic, demand for properties has fallen considerably. The real estate sector was just starting to recover after a few years of slowdown across the cities. The industry had been facing a liquidity crunch as a result of a fall in sales which originated from a number of economic reforms. Along with the sales, funding from the banks and NBFCs had also fallen greatly, putting the developers in a tough spot. There is a liquidity crunch which will lead to a delay in construction of ongoing projects.

The crisis resulted in a large volume of unfinished projects and unsold units stacking up in the inventory. Earlier this year, a number of relaxations and funds were announced to help developers finish their projects. This was helping the industry recover, until the global pandemic once again plunged the realty sector into a credit crisis. Right now, India’s inventory of unsold units is at an all-time high, with around 4 to 5 years’ worth of properties. The value of the unsold properties in the 9 main residential markets adds up to about $80 billion.

The banks fear that if the builders fail to attract enough sales, it would result in too many defaults, adding up to about $140 billion of defaulting loans. Most of the developers are already taking severe losses. The impact of the crisis would be prominent both in case of residential and commercial properties. It is being hoped that a way out of this crisis would be found quickly and the sector can recover.