Real estate sector may take few quarters to revive

2020 has become a challenging year for all sectors. COVID-19 has brought the entire economy to a halt. It is estimated that it will take three quarters for the real estate sector to revive.

The emergence of mutual funds and SIPs opened newer and powerful avenues for people to invest in, which resulted in low return on investment from residential apartments. People preferred to rent an apartment and invest a major part of their savings in the market to ensure huge returns.

Adding to this was the rising price of apartments in the cities and overall maintenance cost of the purchase. This led to an increased number of unsold apartments across categories in the country. Looking at the sector’s condition the government introduced several measures such as RERA, PMAY, and GST along with tax benefits to infuse demand in the sector.

It is estimated that people have lost approximately 50 percent of their long-term savings which were invested in SIPs and mutual funds. Growing concern about security of the money saved in banks has also resulted in a change of perception amongst the public. Banks today are in debt because of NPA’s and defaulters. Considering the current condition and the public perception, it is highly likely that people would now want to invest in something that is secure and less vulnerable to volatile market conditions. This is where the real estate sector may benefit.

In order to bring the sector back on the growth track, repo rate has been cut consistently for the last nine months. This has made home loans cheaper and affordable. Considering the current condition, banks are also willing to lend to homebuyers.