Nov 10, 2021

Changing Dynamics Of The Real Estate Sector In Mumbai After COVID-19

Coronavirus has/had a suffocating effect on the Indian real estate market that brought property transactions to a halt last year when the country was put under lockdown. Since then, the market has made numerous steps toward recovery, and just as it appeared that a comeback was on the horizon, the country was hit by yet another wave of the virus, even more deadly. The real estate sector in Mumbai has begun to show signs of long-term recovery because of the nationwide vaccination campaign.

The year 2020 was a milestone year in the history of economic downturns with construction operations suspended and a major migration of migrant labour. The real estate sector was caught off guard by the crisis, which resulted in low homebuyer inquiries and site visits, as well as ongoing construction activity restrictions. By July 2020, the country had begun to recover from a series of lockdowns and limitations. The pandemic compelled the real estate developers in Mumbai to adopt digital business tactics, resulting in a rapid shift. Within a few months, the percentage of virtual site visits climbed dramatically.

Let’s understand the overall impact of the outbreak on the real estate industry.
1. The Bounce Back
Positive market changes have occurred in recent months as firms and economic activities have resumed. The impetus has been particularly strong in Mumbai, which is one of India's most popular destinations. The desire for real estate projects in Mumbai is nearly insatiable. Due to high sales increases and affordability improvements of 32 percent since 2010, the city's real estate industry has roared back from a temporary dip.

According to a survey performed by ANAROCK Property Consultants and the Confederation of Indian Industry (CII), about 62 percent of Indians believe that the period following the coronavirus outbreak is the best time to invest in real estate. The coronavirus outbreak and its consequences have persuaded them that owning a home is essential.

The demand for homes is increasing at a dizzying pace as new cultures such as work-from-home and online education pervade practically every household, sparking the desire for additional space. In the next ten years, the industry is expected to provide 140 million units, rising at a 19 percent compound annual growth rate (CAGR).

The demand for real estate in Mumbai is strong, especially now that all travel restrictions have been lifted and the economy is gradually returning to its previous pace. Registrations have nearly tripled in the last 60 days, with sales increasing from 7,635 in the third quarter of 2020 to 22,407 in the fourth quarter, a stunning 147 percent rise. The government's structural support added to the rising demand. The nudge has come in the shape of low-interest bank loans, stamp duty relief, and real estate tax perks. The combination of these trio plus Mumbai's rising real estate demand has resulted in a potion of exponential growth.
2. Bank Loans
Since the start of the ongoing health crisis, the Reserve Bank of India has been implementing accommodating policy modifications. It added sufficient liquidity to the market while also providing a soft cushion in the form of a lending moratorium. The RBI has taken several initiatives, one of which is the reduction of bank loan rates. Loans are currently disbursed at a historically low rate of 7%, which was accomplished by a 120 basis point decrease during the fiscal year.

Real estate has swiftly become a viable alternative long-term investment choice for investors wishing to be on the safe side of the market with fixed income yields at all-time lows and incredibly low mortgage rates. As a result, now is the ideal time to realise your dream of residing in South Mumbai.
3. Shifting Preferences
Since the start of the ongoing health crisis, the Reserve Bank of India Consumer tastes have shifted dramatically with a significant preference for Tier I real estate developers in Mumbai. Buyers are no longer unwilling to pay a premium for property units built by some of the industry's most prestigious names, as they do not want to compromise on quality or delivery time, two factors for which the Indian real estate market is notorious. The exit of Tier II builders, who have been cash-strapped since the IL&FS catastrophe and have lost consumer trust in the process, is assisting this change. Providers of housing finance are paying close attention to moral hazards and avoiding adverse selection.
4. Mumbai Market
The Mumbai Metropolitan Region is by far one of the country's most important real estate markets. It accounts for about 32% of real estate absorption, which equates to more than 50% of absorption when measured in terms of value. For the past three years, demand for real estate in Mumbai has exceeded the supply of homes in the city. Now that the virus has been eradicated and favourable policy changes have been implemented, the market is expected to be flooded with buyers, causing prices to skyrocket as a result of the scarcity of housing.
5. Benefits of Stamp Duty, Tax & Low-interest rates
The Maharashtra government reduced stamp duty on registered property, which helped to supplement low-interest rates. The stamp tax is a source of revenue for the state, but the Maharashtra administration chose to play the game wisely, opting for volume growth. Stamp duty reductions (300 basis points until December 31, 2020, and 200 basis points until March 31, 2021) sparked a home market recovery and helped push fence-sitters over the brink, resulting in a massive expansion.

The demand for housing is inherent, the attitude has improved, and COVID has pushed the undecided to make a decision.

While the Mumbai real estate market is currently on a high, the recently passed budget intends to promote real estate demand in the country by providing tax benefits. Until March 31, 2022, the Finance Ministry has allowed a deduction of up to 1.5 lakhs for home loans related to affordable housing. Furthermore, tax breaks have increased the appeal of Real Estate Investment Trusts and Infrastructure Investment Trusts to investors.
Conclusion
While many parts of the world are still dealing with the effects of the coronavirus pandemic, Mumbai, one of the most expensive cities in the world, has seen a huge increase in home prices. Several market conditions, both general and specialised, have made this an advantageous time for anyone looking to invest in real estate.