Indian housing market’s initial reaction to COVID-19

Indian housing market’s initial reaction to COVID-19

Much has changed with the Coronavirus hit the world in December 2019. Amid countries applying extreme measures to contain the pandemic, businesses came to a grinding halt across the world, forcing monetary agencies to slash growth forecasts for the global economy, India included.

In its World Economic Outlook October 2020 report titled, ‘A Long and Difficult Ascent’, the International Monetary Fund (IMF) has said that the Indian economy would grow at a -10.3% rate in 2020 – a downgrade of -5.8 percentage points from the agency’s June estimate.

After the gross domestic product (GDP) numbers for the first quarter of FY21 showed a decline of 23.9% over the same quarter last fiscal earlier, global rating agencies S&P, Moody’s and Fitch also projected Indian economy to contract by 11.5% and 10.5%, respectively, in the current fiscal.

S&P Global Ratings, on September 14, 2020, cut its FY21 growth forecast for India to -9% against -5% estimated earlier, as the number of infections in the country touch record levels. “One factor holding back private economic activity is the continued escalation of the COVID-19,” S&P Global Ratings Asia-Pacific economist, Vishrut Rana said.

While the adverse effects of the pandemic are already being felt across the world, varying opinions are emerging on COVID-19’s impact on the real estate sector, a health emergency that force-launched the biggest ever work-from-home experiment globally, putting a question mark on the relevance of workspaces in a post-Coronavirus world.

In India, where the economic contraction indicates a delayed start of the long-arduous road to recovery, a prolonged lockdown — which started from March 25, 2020, and was eventually extended till June 7, 2020, amid a dramatic rise in the number of infections — worsened the situation in Asia’s third-largest economy.

As is evident, research agencies are predicting a near-term halt in the growth of real estate in India. PropTiger.com data show housing sales in India’s eight major cities declined by 66% in the period between July-September 2020.

“While the Chinese economy has been reeling under the impact of the Coronavirus contagion since December 2019, the situation started to get worrisome in India only in March 2020. The lockdown, which virtually brought to a standstill most economic activity in the country, has hurt all sectors, including real estate. The adverse impact of the Coronavirus is visible on housing sales in the last quarter of the last fiscal because March is usually one of the biggest months for sales,” says Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and PropTiger.com.

“With several macro-economic indicators showing a positive trend in September, we may well be on the road to a more sustained recovery and the upcoming festival season will be critical, in determining the growth trajectory in the sector over the next twelve months,” he adds.