The second wave of Covid-19 has been more devastating than the first, with severe repercussions on the healthcare system all around. To curtail cases, there have been localized lockdowns across most of the top cities and this has affected site visits and, therefore, housing sales.

Unlike earlier, people are wary of going out at the current time, and home buyers are therefore in a wait-and-watch mode. Most developers too have become cautious and are deferring new launches.

“Sales data for the April-June quarter is not yet in; however, we see that from April till date, there is a more than 50% decline in housing project sales in the top 7 cities against the previous quarter. This is especially true for MMR, Pune, NCR, and Bengaluru. Housing sales in Q2 2021 may reduce by as much as 55% against the first quarter, which saw approx. 58,280 units sold in the top 7 cities,” says Anuj Puri, Chairman, ANAROCK Property Consultants.

That said, latent housing demand is huge as evidenced by the sound sales revival seen during and after the first wave.

“We, therefore, hope to see some recovery in 3QCY2021 if cases continue to reduce. Meanwhile, construction activity is still going on, albeit in a limited fashion. Ongoing project construction bodes well for homebuyers,” adds Puri.

Whatever be the case, developers believe that the impact of the second wave of pandemic will be limited on real estate as the sector is better prepared now and has already adapted to digital tools.

Abhishek Pandey, VP-Customer Engagement and Distribution, Viridian RED, says, “The real estate sector has staged an impressive growth in 2021, but the second wave of Coronavirus has impacted the pace. Health and well-being are the topmost priority and in such a case, companies have been banking on digital tools and platforms. They are focusing on virtual tours and digitally-enabled marketing activities.”

“It is quite speculated that some of the transactions and deals might be put on hold owing to obvious reasons. though this is not likely to impact the sector for the long run. The real estate sector is better prepared now and has already adapted to digital tools. Rapid inoculation drives are also boosting confidence and the situation is not as bad as it was in April 2020. The impact is likely to be felt till the second quarter of FY2021, after that we hope that the situation starts improving giving thrust to the sector,” he says.

Ashish Sarin, CEO, AlphaCorp, says, “Today, the second wave of Coronavirus has imbued uncertainty in the sector, resulting in a temporary pause, but the developers are now better prepared and well-versed with the know-how of a pandemic. The Indian real estate sector is now a buyers’ market and the ongoing inoculation program is boosting the confidence of homebuyers. It is most likely that the sector will resume its growth from the second quarter of FY 2021. We will see a steady flow of investments that will ensure growth opportunities with higher returns. The halt will be short-term and cheers and confidence in the market will return as soon as the Covid curve gets slowed.”

Some developers say that the second wave of Coronavirus has brought uncertainty in the real estate segment and its impact will be felt across new launches, site visits and property sales.

“Today, the potential buyers are stepping cautiously and lockdown restrictions or movement regulations in various states will cause a delay in the decision-making process. However, the realty segment has shown indomitable spirit and resilience against the pandemic and is better prepared now. We will witness recovery in the Indian economy soon as people are getting inoculated and a rapid revival is inevitable. The boost in investor sentiments will result in the steady growth of the sector,” says Mukul Bansal, Director, Motia Group.

Industry experts say the second wave has shaken the entire nation along with the administration. Due to the lockdown in almost the entire country, the economic activities and demand have slowed down. The real estate sector too is being affected by the second wave. So, the 1st quarter of 2021 will result in low sales figures and site visits.

However, “if you see the past, after the 1st wave and lockdown when no one could anticipate the future course, real estate had bounced back well. Both the 3rd and 4th quarter of 2020 -21 have shown high volume sales and fast closures. Most of the ready-to-move-in residential inventory had sold out in these 2 quarters and quality pre rented commercial real estate has seen major investment inflow. Surge in amenities, well-maintained, high-safety standards and low-density living are the reason behind the rise in residential sales and the high confidence of investors in rented commercial properties,” says Ashish Thapar, Managing Director, T and T Realty Services.

The pandemic, however, has made one thing clear that it is time to plan for the short term instead of the long term because of uncertainty in the market.

Vineet Taing, President, Vatika Business Centre, says, “Numerous corporates who were planning for the long term, their expansion plans and future office space requirements with leased spaces have however come to a standstill with the resurgence of Covid-19. Maybe the time is to have a short-term vision and switch to Business Centres and Serviced Office Spaces which are best suited due to their flexibility to upscale or downscale, easier lease terms, and ready availability.”

In the last few months there has been a flurry of activity in the redevelopment market of Mumbai. Numerous building societies have made more progress in the last year than they probably have made in the last decade.

First, what is redevelopment? Put simply, redevelopment involves the demolition of an old and small building and replacing it with a new and bigger building – subject to various norms. The equation is straight-forward: Residents of the old building get larger apartments in the newer building for free, a certain number of apartments in the new building are sold in the open market by the developer for his profit, and the government earns revenues by selling FSI to the builder.

On October 4, 2020, I wrote a column titled “Mumbai’s real estate revival depends on lesser greed – not from the developer”. It was an unusual title because the reputation of builders is so notorious that blaming anyone else for the malaise in the real estate sector is akin to blasphemy. Of course there are views from limited corners that highlight the role of the government in squeezing the real estate sector. But there is absolutely no one willing to point out something unpopular – that a big contributor to the sluggish state of Mumbai real estate are homeowners of societies looking to get their buildings redeveloped. Their demands have been out of touch with reality.

The demands may have been reasonable more than a decade ago, during the booming and scandal-driven era of Mumbai real estate. In that phase of rising prices, developers were manipulating norms in such a brazen manner that it would make Nirav Modi smile. This provided builders with a buffer to provide a giant corpus to every member of a society, generous transit rents as well as substantial additional space in the new free apartment. In short – it was a jackpot offer. Some were very lucky. Unfortunately, many were not – as many homeowners, after vacating their homes, never saw a new building come up as projects got stalled. But it set a benchmark on expectations that refused to go away. That meant land costs for a project remained at elevated levels stretching developers financially and impacting demand for housing as end-buyers struggled to climb the affordability ladder.

It didn’t decline meaningfully even after the municipal authority clamped down on mischievous practices of developers that would reduce their ability to offer generous terms. It didn’t decline even after home prices started their decline. Neither did GST or demonetization result in any tangible lowering of expectations.

Now – it finally has. The outbreak of COVID-19 was the trigger and the second-wave has only accelerated it. Home owners and societies have read the writing on the wall. Agreements have been finalized with remarkable alacrity – at realistic terms. Today it is not uncommon to see builders offer incentives that are half the levels of what existed five to eight years ago. More housing societies are being responsible in their choice of developer rather than foolishly opting for builders that sell imaginary offers. Society committees that often held a veto on redevelopment or on the selection of a particular developer are seeing growing resistance from otherwise passive owners in a building. Corruption still persists, with the spoils given disproportionately to a select set of owners – but that is unlikely to end anytime soon. Developers with a track record are seeing more preference and being chased by societies for execution.

Personally, I am relieved to see this acceptance of reality. It should have happened much earlier, given the manner in which the landscape of Mumbai real estate has been altered. Is this the new benchmark? In my view – not yet. Firstly, the majority of deals that have materialized (or are materializing) in recent months have been inked by those who stopped viewing redevelopment as a jackpot. Instead, they viewed the pandemic as an event to decisively act on getting a new and larger apartment to settle in. Secondly, even today the choice of developer is abysmally poor by many societies. I assume these are primarily cases of shady corruption – because the alternative is tremendously poor judgement. Remember the highest bid is rarely the best bid when it comes to redevelopment.

Developers are not celebrating. Despite the lowered demands, the cost-structure and market conditions are not yet viable for many to undertake new projects. That will need support from other stakeholders – including the government. The FSI premium cut by the government has turned out to be a disappointment.

Nevertheless COVID-19 has brought one key stakeholder, land owners, to re-imagine their view of redevelopment. That must be welcomed.