Like every other section of the economy, the real estate sector of India is rolling under the deadly impact of the coronavirus pandemic. But like it is with each and every crisis, this pandemic too may toss up opportunities for buyers as various cash-starved developers with unsold supply may be forced to sell at quite discounted prices.
While comfort housing may see a 20 per cent drop in the prices, developers would present freebies to buyers investing in the mid-segment. These possibly will range from delayed payment plans to even free insurance of Corona that may deal with their fears of a job loss. Commercial property may see a moderate price correction of about 5 per cent and also a downfall in the volume.
For illustration, a villa property in the Worli area of Mumbai is in the market for a small number of months now. The buyer had basically bought it for around Rs 40 crore a few years back and was willing to sell it for about a price of Rs 30 crore four months ago. Today, he is actually willing to sell it at a price of Rs 20 crore, and yet there is not a single taker. This is approximately at a price point of Rs 30,000 per sq ft, which is similar to a high-end commercial property located in the Golf Course Road of Gurgaon.
Chairman of HDFC Deepak Parekh recently said that he actually sees a 20 per cent drop in commercial property prices of unsold residential inventory, and advised all the developers to relieve of their stocks to improve the position of liquidity. He also cautioned the developers against more leveraging, which can actually affect their businesses in the long-run.
A report by HDFC Securities had noted that the large NBFCs expect more 20-25 per cent cuts in the prices of real estate and a 25-30 per cent dips in the volumes for the monetary year 2021 along with economic incentives such as stamp duty waivers. This shall aid the recovery of the demand. The market may merge in the hands of select large organized developers with a balance sheet that is quite strong and access to bank funding. JDA/JV model will carry on and land buying will take a backside seat. Launches will get deferred and the major focus will be on completing the existing unsold area.
A study by Liases Foras has also predicted that the prices of the commercial property in Gurgaon may come down by 10-20 per cent across geographies, at the same time as the land prices could see an even higher reduction of about 30 per cent.
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