India was one of the worst affected countries in the Second outbreak of the CoronaVirus. The economy also took a hit in the last year, and there was a brief lull in the real estate industry. But according to a report issued by the JM Financial Institutional Securities Ltd, Housing affordability in India has improved significantly since 2015. The annual incomes have been on an upward trajectory while property costs have somewhat stabilized.
There has been an increased demand for housing, as the pandemic reinforced the need for having our own homes, as opposed to renting a house. But the second wave caused a rift yet again in the real estate market, as there could be a possible increase in property rates. It has been a time of shifts and unpredictability, especially for developers and investors of luxury flats in Chennai.
Let us break down the factors and examine the possible impacts of the COVID second wave on Indian real estate.
Increase in Raw material rates:
Many of the states in India went into lockdown yet again for a major portion of the last two months. Although construction activities were allowed to continue with safety protocols, the lockdown affected the movement of raw materials between different cities, and states. This also resulted in suppliers increasing the rates of basic raw materials like cement, steel, sand, resins, etc. It has even caused a delay in planned construction activities as they could not be procured on time. This has put pressure on developers and real estate businesses to increase their property prices. But with the lockdown having been lifted, they are holding out to not pass on this burden to the home buyers.
Property Price growth:
The January-March period showed a slight increase in real estate sales, as people usually tend to invest in the last quarter of the financial year. The top eight of India’s prime housing markets have shown a flat price growth. Chennai has registered a 3% increase in property rates, but it hasn’t created a dent in the people’s affordability. Average house prices in the country could increase by up to 1.3% by the end of this year. However, contrary to predictions made in September 2020, the housing market has remained relatively stable. This is great news for buyers interested in luxury flats in Chennai.
Reduced NRI investments:
The pandemic has been on the side of home buyers, creating a persisting buyer’s market in real estate. However, there has been a marked reduction in NRI investments, as the immediate yield or appreciation has been low this year. Housing affordability was given a boost by both the Central Government and State governments through various subsidies and tax deductions. Delhi even announced a 20% reduction in circle rates, a move that will stay effective till September 30, 2021. This is indeed welcome news to home buyers. But these rate reductions resulted in reduced investment by NRIs who are only investing in India from a financial gain point of view.
Reduced home loan interest rates:
In addition to the Government schemes, the national banks have also pitched in to encourage people to buy homes. Almost every bank has reduced its home loan interest rates. SBI is offering an interest rate of 6.7%, while HDFC and ICICI are offering home loans at 6.75% and 6.8% annually. Kotak is offering the lowest interest rates at 6.65%. It is the best time to avail of these subsidies to get increased ROI and buy that luxury flats in Chennai you had your eyes on.
Sell your stock – Says Union Ministry:
The Union Ministry of India has suggested that builders need to sell at reduced prices and let go of the high-priced unsold stock. The Ministry also informed the National Real Estate Development Council that they should try to sell after completing the projects as home buyers and investors are looking for ready-to-move-in projects.
Lifestyle Housing has bounced back pretty well from the first wave of COVID. We offer luxury 4BHK apartments in Chennai that are located in prime residential areas with good connectivity. Check out our ongoing and upcoming projects and have a conversation with our Sales team to know what benefit you can avail by investing right away!
