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IMPACT OF COVID-19 ON THE RENTAL PROPERTY MARKET IN INDIA

25/5/2020

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The impact of the coronavirus (COVID-19) is being felt by numerous businesses around the globe. Business owners are navigating a broad range of pertinent issues such as keeping their employees and customers safe, shoring-up cash and liquidity, reorienting operations, and navigating complicated government support programs.
 
This disruption in business cycles is bound to influence the demand of commercial as well as residential spaces in India’s real estate market. However, at PropertyAngel, we believe that this ripple in the real estate market can be very beneficial to the rental property market of India. To understand that, let’s first discuss the repercussions of the ongoing circumstances on the real estate market and the major reasons responsible for it.

IMPACT ON THE REAL ESTATE MARKET
 
The festive season which was expected to see a surge in demand owing to Gudi Padwa and Akshaya which are considered to be auspicious occasions for launching new projects and also buying new properties, was evidently not the same this year. It also clear that the Navratri season and other major festive seasons are not going to be the same. The housing market did notice some positive traction over the past few quarters. However, owing to the global pandemic and other influential factors like the slow economy and immense pressure on liquidity, this trend is slowly but surely about to change.
 
Many property developers are dubious and are rightfully reserved about the launch of new real estate projects considering the current plight of the nation. Developers would rather focus on the completing and sales of their stalled projects instead. Thus, new project launches are expected to see a fall by a margin of almost 15 to 20 per cent this upcoming festive season. With that said, there are surely a few exceptions. Especially the projects that are already in the soft-launch stages and have already seen a fair amount of expenditure on a marketing campaign.
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​Most of the homebuyers in India belong to the working class category. The pandemic and the possibility of a recession has left many potential buyers unsure of their jobs. This is bound to negatively affect their property buying decisions. Many may not be able to decide to take the responsibility of an added liability and the burden of EMIs after buying a new property with such high levels of uncertainty around their livelihood.
 
In the meantime, we can expect to see some spike in developers opting for launches digitally. This will allow customers to book site visits online where they will be able to choose specific time slots to avoid crowding and maintain the necessary social distancing. The government advisory to avoid any kind of social gathering is certainly going to impact the number of site visits and thus overall housing sales as well.
 
However, there is a silver lining for rental property owners in this entire situation. This is especially true in major metropolitan cities like Bengaluru and Mumbai where PropertyAngel primarily operates. 

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​THE SILVER LINING FOR RENTAL PROPERTY OWNERS
 
The rental apartment industry is now preparing to deal with tenants who may lose their jobs and may be unable to make the current and coming month’s rent. A large number of tenants have already asked for forbearance in April and May, and more will in June. Landlords will seek to emphasize retention, which will mean giving tenants some leniency in the near term. There will be downward pressure on effective rents in the next few months, and property owners will be asking their lenders for forbearance as well.
 
Although the rental apartment industry is now dealing with tenants who have lost their jobs and may be unable to make the coming month’s rent, the long-term outlook for rentals is still very bright, however, in light of demographic shifts that are still unfolding. This is especially evident because of the aforementioned points. Given the fact that the potential buyers have no choice postponed their purchasing decisions; rental property owners will not see a decrease in the number of tenants in the foreseeable future. In fact, there is a good chance that rental property owners will see an increase in the number of tenants. One of the main reasons for this is that the people that have bought a property still do not have the possession, and probably will not be receiving it any time soon. One of the major reasons for this is because of the mass relocation of construction labourers in the past two months back to their villages and homes.  Project completion has become a problematic endeavour and seems impossible at the moment.
 
The single-family-built-for-rent business might be a long-term beneficiary as well as we may possibly see a shift toward larger units that better accommodate working from home getting rented by families allowing more space for a home office or office nook. This is especially true for families that have members that work in the IT industry in cities like Bangalore, Mumbai, Pune, etc. List your property at PropertyAngel to help you choose the tenant you want to rent the property to.

​CONCLUSION
 
With the number of enquiries slowing down, share market being impacted and generally slow economy due to the global pandemic, a massive impact across all the housing segments in the real estate industry is inevitable. The outcome of this pandemic on the real estate industry, while loosely predictable, is still largely very uncertain. While the world is yet to know the outcome of the pandemic and how well the country would emerge from the current situation; taking care of your rental properties with PropertyAngel is never a bad idea. List your property on PropertyAngel to find the most suitable tenant.  
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