Given the already despondent situation within many segments of real estate, doomsday preppers are out in large numbers. While developers are being advised to reset home prices to spur demand, some hotels are seeking a change of land use to residential. Office space demand is suddenly shrinking and retail malls are seeing tenants cancelling leases or refusing to pay rent.
Moreover, consumers who own a home or who wish to own a home in the near future are also confused. How does one conserve and revive their investments? When to make new bets and where? What to choose in order to be aligned with the emerging trends?
Real estate does not merely comprise buildings made of brick, mortar, glass and steel. It is an enabler of our existence and well-being. Contrary to fears and low expectations, real estate in the post-covid world will most likely survive and eventually thrive as an asset class, though it will look different. Decentralization, redistribution and restructuring will be the major themes of this transformation.
While it is early days yet, there are visible indications of some of the ways in which the pandemic may alter things for both consumers and developers. It is important to note that the winds of change have been triggered not just by the pandemic.
There has been a need for many of these changes and the lockdown has made all stakeholders, including governments, think and act in ways that have heightened this realization.
Home as the key driver
The home will gain more prominence over the place of work and influence urban development and our real estate choices.
The good news for India is that the long-term housing demand trend remains secular due to a young population which continues to enter the workforce in large numbers. Over the last few years, there had been a gradual shift in mindset among first-time homebuyers who began to favour a rental home, challenging the established preference of Indians to buy homes.
The pandemic is driving them back to the desire to own a home. Real estate investments provide a higher sense of security during a crisis, when financial assets come under pressure. Additional space at home, as warranted by work-from-home, is an important consideration as well.
With the constraint of having to stay near one’s place of work having vanished for some and reduced for many, there will be an increasing preference to move away from the polluted and congested parts of the city. Cities like Bengaluru, supported by imminent metro rail connectivity, are already witnessing a shift toward the suburbs. This, backed by the sound economics of owning a home in the suburbs compared to paying high rentals in city centre apartments, is shifting the preference back towards ownership in more affordable peripheral locations. There will be a marked preference for plotted residential developments or a…