With GDP growth of 4.2% in FY 2020, the slowest in eleven years, India was already marred by economic slowdown. At such a fragile time came the Covid-19 crisis. The nationwide lockdown, coupled with reverse migration of construction workers, put the sector under immense stress. Pay cuts and job uncertainties led to a weakening of consumer sentiments. This was also validated by a dipping number of searches on RoofandFloor in the first half of 2020. When compared to H1 2019, the number of home seekers in both Chennai and Bengaluru dropped by about 30% in H1 2020.
To mitigate the adverse economic impact, the government introduced a plethora of short-term relief measures over the last three months. The Reserve Bank of India, too, slashed the repo rates to 4%, making it the lowest ever.
However, with economic activity muted, the real estate sector is poised to face some challenges. Even after the normalcy returns, developers are likely to face liquidity challenges, restricting new launches.
Given the current situation, it was imperative to take stock of how residential markets have reacted in Chennai and Bengaluru. This report summarises the larger picture for residential trends observed in H1 2020 in these two prominent cities of southern India.
While the pandemic has clearly brought out a newfound appreciation for owning a home, prospective homebuyers are now re-evaluating their home buying needs.
H1 2020 Snapshot
• Due to the virus outbreak, the new launch supply took a backseat in the first half of 2020. • With fear over job loss and an overall slump in economic activities, the case for affordable properties got further strengthened in H1 2020.
• In terms of property type, apartments remained the preferred choice of homebuyers in both Chennai and Bengaluru. Interestingly, in Chennai, inclination towards plots increased from 18% in H1 2019 to 26% in H1 2020.
• The festive season that falls in the last quarter of the calendar year might see an increase in new launches and sales volume.
While the underlying desire to own a home remains strong, with all-pervasive uncertainty, there is still a long way toward the resurrection of the Indian real estate. The recovery will primarily depend on the time it will take to control the spread of the virus.