Builders continue to stare at empty nest syndrome

Demand for flats and homes came down during April and May 2021 when the deadly second wave was ruling high. Developers are hoping that the buyers will come back in droves to buy their dream home. The developers are also offering facilities like full refund of initial deposit if the sale doesn’t happen.

Builders continue to stare at empty nest syndrome
Where are the buyers?

THE ferocity of the second wave of COVID-19 infections has clearly hit the Indian real estate sector, particularly the residential segment.

Rough estimates indicate that the already faltering realty sector witnessed around 10% to 15% lower sales and inquiries in the two-month period, April and May 2021 when the coronavirus virus was at its deadliest.

This quantum of a slowdown in inquiries and lower sales is comparing this two-month period to the first three months of CY2021.

“The real impact hasn’t been seen. Most of the listed real estate players have only published financial results for the Jan-March quarter. The extent of impact will be visible during Q1 or April-June 2021 results,” a source in the industry said.

Malaise spread across

The spectre of lower sales and buyer inquiries was witnessed across the nation. And what is worse is that the much talked of affordable home segment (residences costing maximum of ₹45 lakh) also didn’t see that many sales or inquiries.

Unexpected bonanza

It is being said that the mid-segment (homes priced between ₹75 lakh to ₹1 crore) have seen some quantum of buying. Some of the smart investors who have had surplus cash reportedly have bought these properties.

Second wave hits site visitation

Most developers have a normal practice of taking the potential buyers on a site tour. Thanks to the second wave, there was no such facility which reportedly impacted the potential sales all that more.

More trouble in the offing

Even assuming that there is a semblance of normalcy and the unlock goes through, buyers are unlikely to rush and book an apartment or home, thanks to the start of Aashaadh (the inauspicious month in the Hindu calendar) when people don’t commence any new activity like making a new investment.

Prices haven’t dropped

Although sales have been faltering, developers haven’t been in a rush to go ahead and liquidate their stock.

In other words, they aren’t offering those mouth-watering discounts every potential buyer is waiting for.

At the same time, construction activity has reportedly slowed although many states haven’t banned them. One developer who spoke to TV9 Digital said that close to about 20% of construction activity has been stalled on the back of the second wave.

Meanwhile, some builders are offering ‘no questions asked refunds’ if post a site visit, the buyer drops plans of eventually buying the said flat or home (the site visit will happen only when the full lockdown is permitted).

However, the initial advance is slightly on the higher side with the potential buyer having to fork up to 10% of the cost of the said apartment or home!

Will costs abate?

Meanwhile, the real estate developers haven’t hiked their selling price despite the significant jump in input costs particularly of steel and cement. “We haven’t hiked the prices. We hope the rally in steel and cement prices stalls. However, if it were to continue post-lockdown, developers will be forced to seek a 10% to 12% hike in selling price,” warned one Bengaluru-based developer.

Will things change post lockdown? It is difficult to hazard a guess with all the talk of a possible third wave hitting India.