Real Estate Market Amid Corona

Jul 19, 2020 12:58 PM

While it is certain that economy is going to take a dip in the backdrop of Coronavirus. A recession is when we have 2 economic declines for 2 consecutive quarters, which also seem very likely now. While traditionally and all over the world an economic down turn would mean correction in asset prices, Indian scenario can be peculiar in multiple ways.

For a while there will be a lull in transactions considering the uncertainty around economy and cashflow. Home buyers may postpone purchases in the event of a price correction. But, we can’t say for certain prices are going to plummet. It may not be so easy to ascertain that.

Real Estate traditionally has two kinds of people investing in a property. Final Home Buyers who mostly buy flats or independent houses by taking a loan. And investors who’d put in their savings, excess capital into buying land or properties. As economies boomed real estate became a safe bet for parking their capital.

Now a price reduction depends on how many of these buyers will look for an exit and how many of them will want to wait it out. If there’d be job cuts or salary cuts, as being widely predicted, it may become unviable for some families to hold on to the second house or land that they have. Or some investors with cash flow requirements will want to sell properties. There is no doubt most of these will be a distress sale owing to a downturn.

It is impossible to predict that the entire sector will see a correction. It is highly likely that there will be good deals on offer. It is also hard to predict what will be the best valuation under these circumstances. Most of the deals will be by aspirational. Like that property in a great locality that you always wanted to buy, but out of your budget. You may just find the deal now. A lot depends on how much cash the seller needs and how much cash the buyer can afford. Plus we have to factor in pre-covid prices as a data point to consider.

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