News: The way forward: Where should you buy a house now?-19-05-2020
Updated On: May 19, 2020
The way forward: Where should you buy a house now?
Suburbs and tier 2 cities are likely to gather more interest if work from home becomes the norm in future.
Though residential real estate has very few takers right now, the future looks promising. The housing segment is expected to propel the real estate sector forward between 2022- 25. Among favourable factors, the emerging structural change involving work from home will play an important role. While most people are now working from home due to the current circumstances, several IT companies have already announced that this would be a permanent feature for at least a part of their workforce. “Work from home as a concept is going to remain because some companies are realising that productivity is not impacted by this. This also allows companies to hire employees from smaller towns,” says Shveta Jain, MD, Residential Services, Savills India. In the first phase, this shift will be moderate because companies will be grappling with issues like data confidentiality, etc. “Once things settle, majority of the workers will go back to offices and only the non client facing will continue to work from home,” says Prashant Thakkur, Director & Head of Research, Anarock. What will be the impact? “The impact will be more in some sectors like IT and less in others. So, this could be around 10-15% of the aggregate work force, which will also be substantial,” says Samantak Das, Executive Director and Head of Research - Real Estate Intelligence Services, JLL India.
Residential will lead next phase of recovery
Average annual investment (in $ billion) is projected more in housing.
Figures for 2020-21 and 2022-25 are estimates by Savills India
Estimated time to recovery
Affordable housing is more resilient and is expected to bounce back faster
Recovery will start once the nationwide restrictions are significantly eased
Emerging suburbs
The work from home culture will change the way we live. Moving to more spacious homes in the suburbs would make sense because commuting will not be required. As most urban homes today do not come with space meant for a home office or study, a bigger home in the suburbs could be the answer. “Most people settled for small houses close to office. If they work from home, people will move away from city centres to suburbs, which are more spaced out and also cheaper,” says Jain. Companies have also started realising that lower travelling time means more productivity. “To reduce travelling time of employees, companies may go for the hub and spoke model —main office in the city centre and several smaller offices in the suburbs. Since there is a shortage of quality office space in the suburbs now, this shift may happen only in the medium to long term,” says Das.
Tier 2 cities will gain
Though metro dwellers are unlikely to shift to smaller towns, several positive developments are expected there also. “Due to continued Covid-19 induced restrictions in the metros, some companies may move their second centres to smaller cities. While this will be the back up plan of companies against disturbances like this, it will also create more job opportunities in smaller towns,” says Thakkur. More job opportunities in smaller cities would mean increased housing demand in those places and lower migration to metros. The working class profile may also support housing demand in tier 2 cities. “Demand in smaller cities is driven by end users. Since the percentage of government and public sector employees are high, the ongoing employment slowdown will not affect this segment,” says Thakkur.
The way forward
Though home buyers have to consider factors like their job security, etc, experts feel that the coming quarters will be a good time to start searching because of the expected correction in price. Since new transactions are not happening due to the lockdown, the pricing pressure is not visible now. However, experts feel that the end user activity will come back in the next 2-3 months and the downward pressure in price will be visible after that. “Though the extent of price correction will vary from micro market to micro market, housing prices are expected to come down by 5-8% in the next 6-9 months and this will open up opportunities for end users,” says Jain. Since prices have remained flat for the past few years, time correction has happened already. Das also feels that this is a good time to search and zero in on the dream house of your choice. “Though prices of existing projects are not being lowered, new projects are coming up at competitive prices. Even corporate developers are giving good offers. Being in a buyers’ market now, home buyers can also drive a hard bargain,” he says. In addition to the suburbs and smaller cities, real estate investors can also look at lower priced segments like affordable and budget housing that are expected to recover first. “While high end projects will continue to suffer due to lack of demand, affordable and budget projects will recover first. Continued government support will be the main driver in keeping the affordable segment resilient,” says Thakkur. Das concurs. “While affordable and budget segments are expected see green shoots from the coming festive season (from October), high-end and luxury segments will remain stagnant in 2020-21,” he says. Properties costing up to Rs 40 lakh are referred to as affordable housing and properties costing between Rs 40 and Rs 80 lakh are referred to as budget housing.
