Will real estate crash or boom in 2021?

Amid the COVID-19 outbreak in 2020, the real estate sector had a rollercoaster ride, especially due to the nationwide lockdown. However, with the country proceeding towards the new normal, it was  expected that real estate will revive economically in 2021. But, with the second wave of COVID-19, the positive predictions have taken a back seat. Now, whether the real estate sector will lead or linger behind is all dependent on how India handles the second and the speculated third wave of Coronavirus.

The real estate experts anticipated that the market could revive completely in the year 2021. It is the lethal resurgence of the COVID-19 outbreak, that has made this anticipation seem a bit hazy. With almost every state entering partial or complete lockdown in the country, people struggling to access healthcare, real estate is affected once again. As per industry reports, even though the first quarter of 2021 reported a 21% increase in housing sales,  new launches dropped by  40% in the same period. Where have u taken the data from?

In the January-March period of 2021, the sales record of homes bounced back with economic and policy reforms which were inclusive of low-interest rates and stamp duty reductions. However, the preferences of buyers regarding real estate changed to larger units with added safety measures. This is according to the insight from Square Yards’ latest report titled,” Evolution of home buying trends in the COVID.” One major aspect that led to this surge in housing demand is the adoption of work from home lifestyle. Fence-sitters who were hesitant to invest in real estate till 2020, came out and invested, leading to a further increase in demand for larger units in Q1. 

The effect of modifications in home loan rates

Real estate may suffer a setback in Q2 and Q3 of 2021 due to the modifications in the home loan rates. Reports have it that the second wave of COVID-19 will encourage people to save than spend. This is contrasting to the economic contraction of the first wave of COVID-19 which shaped majorly because of the supply disruptions and a long nationwide lockdown. Presently, while the Reserve Bank of India maintained a status quo on the policy rates on April 7, 2021, the State Bank of India decided to hike their home loan interest rates by 25 basis points from April. Thereby, giving a piece of evidence that the banks will move ahead of the low-interest rate routine being followed for the past year.

Affordable housing to witness a surge

With the central government’s aim to build 20 million affordable houses by 2022 under the Pradhan Mantri Awas Yojna scheme, residential real estate is expected to improve significantly. Thus, the increase in residential units in urban cities will automatically enhance the demand for commercial real estate. Also, the extension of income tax benefit for buyers as well as developers for affordable housing will further give a push to residential real estate in 2021.

Will vaccination bring back normalcy for real estate?

While vaccination could be a slow and steady way to recovery for the COVID-hit residential real estate sector, it will highly rely on how Asia’s third-largest economy manages the availability of the vaccine to its huge population. The same would have a considerable impact on the complete economic revival of the country leading to the shaping up of India’s realty segment.

Overall, a mixed bag of predictions are being made by industry experts on whether the real estate sector will crash or boom in 2021. Changes in economic and policy reforms combined with India’s management of the second and the expected third wave of COVID-19 will decide the future of real estate not only in 2021 but also for the  future years. Though the enthusiasm shown by the buyers in the first quarter of 2021 has fallen flat as of now, control over the resurgence of COVID-19 can boost investor’s confidence in real estate.

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