The impact of COVID-19 Positive on Real Estate – Negative or Positive?

Covid-19 came as a humanitarian challenge that changed the way people live, work, and play, maybe forever. It took away people’s lives and source of livelihood. The global economy saw one of the biggest downturns. There was a point in time when people were more scared of the pandemic-led lockdown than the pandemic itself, due to its devastating impact on the economy.

Real-estate, retail, finance, aviation and automobiles are the 5 sectors that are worst hit by COVID-19. Speaking of realty, last year when the nation went into a complete lockdown between March and May 2020, many new constructions stopped, sales took a hit, and new launches were postponed.

The pandemic brought in a domino effect on the realty sector. At first, the lockdown brought the construction activities to halt, then the fear of health & financial crises caused a mass exodus of migrant workers, the demand for social distancing & the sudden realisation of the importance of saving overspending led to negligible homebuyer enquiries and site visits.
Beginning June 2020, just when the realty sector started taking baby steps on the road to recovery through digital business strategies; and seeing a ray of hope through increased demand of virtual site visits, the country was struck by 2nd wave of COVID-19, this time, deadly than previous.

The cities where real estate activities have most suffered are Mumbai, Delhi, and Bengaluru amongst others. For instance, the Mumbai Metropolitan Region (MMR) in Maharashtra has witnessed a drop in property registrations. Experts say the recovery of the realty market in India could now prolong until 2022, and that it will be highly dependent on the way India deals with the second wave of Coronavirus.

THE OVERALL DAMAGE DONE – What reports say?

Going by a KPMG report, the real estate sector has incurred a loss of over Rs 1 lakh Crore since COVID-19 broke out, resulting in a serious liquidity crunch for real estate developers. The credit shortage brought down the residential sales from 4 lakh units in 2019-20 to 2.8 lakh units in 2020-21 across the top seven cities of India.

The overall residential demand declined by over 40 per cent in H1 of FY21, says the India Ratings and Research Private Limited (Ind-Ra) report. The agency believes that the sales will continue to decline until the pandemic is brought under control.

According to a report by Liases Foras, the pandemic-led lockdown cascaded the volume of unsold inventory from 15+ quarters at the end of FY-20, to 19+ quarters towards the end of H1 FY21. The volume of the unsold stock increased by an extreme dip in sales in Q1 and dampened recovery in Q2 2020.


What simply existed as a concept in an organisation’s HR policies, now become a new way of life – Work from Home (WFH). The rise of the WFH concept led to the fall of the need & demand for office spaces.
According to a report by Cushman and Wakefield, the net leasing of office spaces declined from approximately 70 lakh sq. ft. in 2020 to around 35 lakh sq. ft. in Jan-Mar 2021.

In Q4, the immunisation drive by the Government picked up the pace, so did the Coronavirus cases. Thus delaying leasing & impacting leasing rates. The net leasing rates dipped by 33 per cent in 2020, and average commercial property prices declined by 7-10 per cent.

The demand for flexible workspaces such as WeWork & Awfis which had resurged in the last few months has declined since the second COVID-19 wave emerged. If the pandemic is brought under control soon, experts anticipate leasing 38 MN sq. ft. flexible workspaces in the coming year.

Speaking of retail real estate – data compiled by Statista says that retail mobility has declined by 55-60 per cent across India owing to the partial lockdowns and curfews across cities. Another factor contributing to this downfall is that people are no longer keen on visiting retail spaces – they can get everything, from food & clothes to entertainment delivered home, in just a click. Thanks to e-commerce and OTT platforms.

Looking at the other side of the grass, with WFH becoming a norm, residential real estate underwent a dramatic architectural change. Along with the routine bedroom, living room, washroom, kitchen & balcony, providing a dedicated WFH space has become a need of the hour in the upcoming projects.


There are many points to be considered while discussing realty prices.

  1. While on one hand, during the 1st wave, some developers went all out to woo buyers by offering major discounts. We came across news such as:

    A 559 sq. ft. property of Hiranandani has been closed for Rs 86 lakh this month. A similar unit was transacted at over a Crore in MarchIn January, ready-to-move-in residential units – one in Ashoka Towers in Parel and the other in Omkar 1973 in Worli – were both available for around Rs 8.5 Crore. Then coronavirus struck & the same units were available in May for Rs 7.5 Crore and Rs 6.5 Crore.

    On the other hand, some developers continued to withhold prices due to limited profit margins. Unlike the first wave, the second wave of the pandemic has, so far, not impacted the prices of the residential market.

  2. Meanwhile, the pandemic-induced spike in prices of essential raw materials, like steel bars, cement, plastic, man-made polymers and resins, etc., are pressurising developers to hike the prices of new projects. The supply shortage is only making matters worse. There are chances that once the lockdown is lifted, we may witness minor hikes in property prices by the end of the next quarter, whereas we may see more significant corrections in prices by the end of 2021.

  3. During the 1st wave of the pandemic, people realised the value of owning a home for themselves and lucrative deals added fuel to the fire.In areas such as Maharashtra, where the stamp duty charges were reduced from 5% to 2% until 31 December 2020 and 3% from January 1 to 31 March 2021.

    Furthermore, RBI kept the repo rate unchanged at 4%, making home buying affordable by availing home loans for as low as 6.65% annual interest, which was in contrast with the average home loan interest rate of 8% in January 2020.

    While this is one side of the coin, COIVD-19 related constraints such as stay-at-home & social distancing, and delayed delivery of other support facilities, such as processing papers for applying for home loans, having the agreement for sale or flats registered, or reaching out to sales and marketing personnel to garner more information about the project are either discouraging buyers or coaxing them to postpone their home-buying plans for later. All of which is leading to a dip in sales.

    Although the vaccination drive seems like a silver lining in the dark cloud of COVID-19, the year 2021 is expected to remain challenging for the real estate sector.


Iron & steel, cement, machinery are amongst the many industries that are dependent on the real estate sector. The pandemic inflicted heavy losses on them all during the year 2020. Approximately 250 SMEs reported losses that were accompanied by increased costs in 2020.

This was the condition during the 1st wave of the pandemic. The developers and manufacturers were more prepared and cautious during the 2nd wave. They made preparations such as installing labour camps, putting a shift-wise duty in place, and ensured adherence to COVID-19 protocols such as regular temperature checks, once-in-a-moth COVID-19 testing of labourers and installing sanitising stations on construction sites.

The government’s move of initiating a vaccination drive for those above 18 years of age will boost the construction activities as it will help the labourers to get vaccinated at the earliest. It will also make labourers feel safe & eventually reduce migration.


Post-phase-4 of lockdown, the realty sector slowly began its operations, and there came 2021, which seemed to be the year of recovery as COVID-19 vaccines were developed. But the happiness was short-lived as the pandemic’s 2nd wave gushed in, putting the developers and financial institutions in cautious mode. The resurgence of the pandemic has compelled financial institutions to avoid risky investments, adding to the woes of the real estate sector already suffering from a liquidity crisis. But it’s not all dark and gloomy for the realty sector like it’s said, “A smooth sea never made a skilled sailor” – Franklin D. Roosevelt. The realisation of the importance of owning a home in the consumers’ mind during COVID-19 can play an important role in increased residential property sales. Once the government accomplishes its goal to vaccinate its over 1.3 billion population and the fear of COVID-19 diminishes, there are high chances for the realty sector to experience market equilibrium. Points supporting this stamen are

  1. People may return to work, thus increasing the demand for commercial spaces;
  2. Increased e-commerce may lead to increased demand for industrial units to store inventory;
  3. Pandemic has turned many employed professionals into entrepreneurs, this may lead to a rise in demand for retail spaces;
  4. Virtual site visits have lured and made it possible for NRIs to invest back home;
  5. Low-interest rates (home loan interest rates are at below 7% now) and high tax exemption (rebate against home loan interest payment is as high as Rs 3.50 lakhs per annum) can make the option of owning a home attractive over renting;
  6. Many people, especially professionals who have permanently decided to return to their hometowns, who were earlier living on rent in Tier-1 metro cities like Mumbai, Bengaluru, Delhi etc. will look to buy homes, and finding employment in their hometown. Thus, increasing the demand for commercial, residential and retail spaces in Tier-2 cities.
Having mentioned that, here we are seeing the glass half full, but if we look at the half-empty glass, the pandemic has led to job losses and pay cuts, and the entire population is yet to be vaccinated. So we will be able to see a clear picture once the pandemic is tamed and the infection rate declines. Till then, it’s all about the wait-and-watch approach.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. Ashar Group does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.