Impact of COVID-19 pandemic in Chennai’s real estate market


After about six to seven years of stress and slump, the real estate market in Chennai was about to take an upswing. With businesses trying to increase their footprints in the city, the market was looking up for hectic activity in 2020, but the pandemic came as a heavy blow to the entire nation and the real estate sector was no exception.

Since all activities came to a standstill and with workers returning to their home states, construction faced a crisis. And post the lockdown, the prices of construction materials including steel skyrocketed making the already struggling real estate industry face more challenges. Besides, the commercial workspaces, too, started seeing a decline in takers as the new norm of hybrid work culture has become prevalent among IT and ITES companies which are considered to be the major targets of commercial working spaces.

But if you thought the pandemic completely crippled the real estate industry, the answer is no. The pandemic proved to be an ideal time for getting more conversions than the previous periods. The real estate industry has been seeing more serious buyers, especially in the home segment, as more families found time to discuss and finalise investment options in real estate during the lockdown.

Many young couples, who were forced to remain home due to the coronavirus lockdown, took the opportunity to search for their dream pads and most of them converted their thoughts into purchases. A decrease in the home loan rates and more NRIs showing interest to settle down in their home states have been driving the real estate business during and post the lockdown.

In the report, India Real Estate Outlook- A new growth cycle, by JLL, a property brokerage firm, it is indicated that new housing demand would continue to be in the affordable and mid-segment, with real estate developers trying to take advantage of the strong pent-up demand.

Experts opine that with most rating agencies predicting an upward revision in India’s growth forecast, the recovery in the countries’ housing sector may also be better and earlier than imagined.

The top three factors that have been driving the demand in home buying

  • Decreased home loan interest – Home buyers can now avail of home loans at 6.65 % annual interest, which was 8% in January 2020.
  • Work-from-home options have made many buyers look for spaces of their own.
  • During the pandemic, many NRIs have realised the need for having a house in their home country to settle down in the future.


Residential properties

Homebuyers who were on a wait-and-watch before COVID-19 are now trying to cash in on the benefits of the reduced home loan rates and they have been showing more interest in buying ready-to-move-in properties.

Residential properties in the low and medium segment are showing the maximum traction in the price range of INR 25 to INR 75 lakhs. The work-from-home (WFH) option has made many take a call to invest in better properties that they can now own instead of leasing.

Some sections of the people have also been looking for bigger and larger apartments in the suburbs, which they can use combining the benefits of home, workspace and leisure pad.

The real estate sector is hopeful that the affordable housing segment will look up to demands from millennials with many companies opting for remote working. They expect that this will boost the requirement in Tier II and Tier III cities, too.


Increased NRI investment 

According to the Real Estate Vision 2025 study by CII-Anarock, 38% of those who booked Indian properties were NRIs. Increased transparency and eased investment norms have made the residential real estate market increasingly lucrative for UHNIs and NRIs. Events like the recent depreciation in the Indian rupee have further sweetened the deal as NRIs now have to spend less money than before to buy a home in the country. The significant drop in property rates, stricter regulatory measures, and enhanced consolidation in the sector have together created an attractive avenue for NRIs to invest.

Technology in real estate sales  

Though the COVID-19 lockdown impacted property shows, technology came to the rescue of builders and property developers. Instead of on-ground property shows, many started using the virtual platform to come up with virtual tours of their properties. This has been enabling buyers to digitally view the apartment, process documents, complete paper-work, and even make the purchase without having to be present physically.

There is no doubt that the emergence of smarter home designs and eco-friendly characteristics have enhanced the attraction of properties for NRI buyers. However, contrary to the regular middle-class customers, NRIs prefer homes that match their lifestyle. They look for properties that have plenty of green spaces with good connectivity with wellness and healthy living options. There is no denying the fact that post-COVID-19, there is an increase in demand for bigger homes with more spaces.

Impact of COVID-19 in office spaces

During the lockdown, the world over, companies were forced to experiment with the work-from-home model. India, too, opted for the same and did well in the same experiment.

While many sectors discovered that they can manage productivity levels with the work-from-home model during the lockdown, some organizations have started calling back their employees where WFH cannot be a sustainable option. However, remote working continues to be the preferred model, even now, by both the companies and employees.

Real estate developers are also aware of the impact of this phenomenon on their businesses since they foresee a mixed system of working models with flexible and hybrid models becoming the mainstay. They also predict that instead of putting all the employees in one location, companies will prefer to arrange workspaces spread across multiple locations and experiences including co-working spaces.

However, not many are seeing WFH as an end to the office going culture. As human beings thrive in a collaborative environment, real estate developers believe that the workforce would ultimately get back to offices. Also, organizations would soon start measuring the psychological impact on employees, data security and productivity challenges in the WFH models.

Echoing the same sentiment, some high-value investors are also scouting for projects and spaces that can give them good dividends in the future. Though less in numbers, it cannot be denied that such transactions are not taking place.

Malls and reduced footfalls

The crisis in the retail industry in the wake of the pandemic has reduced the footfalls in the malls considerably. While 54 malls were expected to be launched across India in 2020 before the coronavirus pandemic, after the lockdown only five news malls were started, that too, in cities like Gurugram, Delhi, Bengaluru and Lucknow.

The scare of virus spread is still looming large and the footfalls have not improved in malls, even after the government lifted the lockdown. The sector is under stress and mall operators would have to act practically to survive the crisis and bring back the retailers to the malls.

The investors, too, are keenly monitoring the situation and they expect the footfalls to get back to normalcy as people have started regaining confidence slowly yet steadily.

Warehousing spaces

With the growth in the e-commerce business, it was expected that demand for warehouses will go up drastically. But that did not take place and instead, there was a dip in the demand in 2020. But, now realtors are expecting that with the internet penetration at an all-time high, even in Tier II and Tier III cities, demand for warehousing spaces will see an upward swing in such places.

Massive vaccination drive 

With a massive vaccination drive for coronavirus underway, risks to the recovery may abate and economic activity is expected to gain momentum in the second half of 2021, RBI, India’s banking regulator, said, while announcing its monetary policy statement on February 4, 2021.

“Financial markets remain buoyant, supported by easy monetary conditions, abundant liquidity and optimism from the vaccine rollout. Growth is recovering, and the outlook has improved significantly, with the rollout of the vaccine programme in the country,” RBI governor Shaktikanta Das said.


Outlook for the real estate sector in 2021

Though the pandemic impacted severely the sector in 2020, better days are expected in 2021. As more and more millennials, buyers and investors are keen on homeownership, the demand for residential properties would be high in the year.

With improved strategy and tech-enabled processes, realtors are shifting from the traditional methods of sales to new, transformational methods of selling. It is expected that the growth will pick up momentum and the sales will be restored to pre-COVID times.


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