Are there chances of crash in property ?
Yes there are a lot of chances that the property may crash because of lock down. But there are a lot of possibilities in this case.
In this blog we are going to talk about the chances or market crash and how it can be good for you and how it will affect the market
What we are going to learn
- Short story
- Statement of Niranjan Hiranandani President of national real estate development council (NAREDCO)
- Statement of Deepak Parekh chairman of Mortgage lender housing development finance corporation
- Effects of 2008 global crisis on real estate?
- Effects of demonetization on real estate?
- What will be the Effects of lock down and coronavirus pandemic on real estate?
- For which persons the slowdown will be helpful?
- Conclusion
- FAQ
Short story
Yes there is a lot of chances that the real estate sector will crash as the property market started indicating this thing.
The market started going down, the real estate sector from the past 5 years was going down day by day, and the financial year 2019-20 was a major setback for it, as the demand was very down as compared to the previous 10 years.
One major reason for it is also buyers are shifting towards other sources of investment. Real estate and property market is a capital extensive industry and it needs a big amount of capital.
If you want to invest in real estate, the price of real estate for a small 1bhk apartment in a developing city of India will cost you around 15 lacs that too starting price and in developed cities like Mumbai price for a same 1bhk apartment can go around 1 crore rupee and maybe more than that.
And in today’s life, a small investor doesn’t have that much money so they opt for other investments, that’s also a reason that demand for real estate was going down day by day and this corona lock down will be a major setback for the segment.
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Statement of Niranjan Hiranandani President of national real estate development council (NAREDCO)
Mr. Niranjan said that the real estate sector has lost around 1 lakh crore rupees ( around 14.5 billion dollars ), and increasing day by day.
Every day passes with huge losses in the sector. He said that the segment will crash around 10%.
Mr. Niranjan suggested that to revive the economy Government should give an economic relief package of a minimum of 10% of the nation’s GDP.
He said if we can overcome the crisis today. Then only we will be in the place to stand up again.
NAREDCO has demanded a relief package of around 200 billion US dollars to 300 billion US dollars, with 100 billion US dollar been provided immediately, 100 billion US dollars within 4 months, and the rest 100 billion US dollars in 8 months.
And also demanded for GST cut to around 50%. They also said RBI should declare 6 months EMI waiver and some decrease the stamp duty tax.
NAREDCO President Mr. Niranjan said that there is a high possibility about fall in price after the pandemic.
He said that the price will fall down as there will be some people who are desperate to sell, but this will depend on the location, type, and growth opportunity of the individual projects.
Statement of Deepak Parekh chairman of Mortgage lender housing development finance corporation
Deepak Parekh chairman of Mortgage lender housing development finance corporation on Tuesday 14th April 2020 said that the real estate segment will go down around 20% as a result of the corona virus pandemic and nationwide lockdown.
While addressing the webinar organized by the national real estate development council (NAREDCO) Parekh said NAREDCO’s statement downfall is around 10-15%, but we should be ready for around 20% fall in the sector.
Parekh said that the Indian real estate market was going through pain because of various reasons such as economic stress in certain segments, due to less liquidity in the segment.
He said that this will be a golden opportunity for potential customers. “who have job security after this lock down as they’ll get the home at very affordable prices.”
Effects of 2008 global crisis on real estate and property?
Global crisis 2008 has a very adverse effect on the real estate market. As the market falls down very quickly, both in the global scenario and on the Indian market also.
The global market had a fall of around 20%. In the Indian market in big cities like Delhi NCR, Bangalore, Mumbai, and Pune have seen the oversupply of office spaces of around 25%, many peoples lost their jobs.
This has affected the demand for real estate as a 25% fall in the price of the property and a 30% slowdown in sales of properties.
The loan prize was gone up from 7% to 12% per anum. But after the end of this crisis, it slowly started to grow again.
And after 1 year it has picked up some pace again.
Effects of demonetization on real estate?
When on the 8th of November 2016 PM Narendra Modi announced the ban on 500 RS and 1000 RS notes.
The growth of the nation was slow down and real estate is one of the worst affected sector because of demonetization, after around 8 years of 2008 global crisis.
Real estate has the first time seen this much of downfall. In every aspect this downfall was very similar to the 2008 crisis.
The only difference was real estate went 27% down in the 2008 and in 2016 it went down to 9%.
But there was a twist the demonetization happened in the last quarter of the year and the last quarter ( 4th quarter) showed around 44% in sales volume.
The residential market in the top 8 cities in India was started with a positive effect in 2016 with the first two quarters observing a 7% jump in sales number.
Third-quarter sales number also observed positive growth as the festive season. But in the last quarter with the demonetization the sales went down to 44% fro that quarter and 9% for the year, from that time real estate is going down slowly day by day.
What will be the affects of lock down and corona virus pandemic on real estate?
The real estate sector is going to be slow down as the result of the pandemic and lock down.
Real estate was facing negative effects from the past few years and this pandemic will break its legs.
It is estimated that there will be around 20% slow down in the sector.
Till now it has suffered around loss of around 1 lakh crore and the losses are going up day by day.
And this time if we compare it with the 2008 global crisis at that time before the crisis it was offering very good returns and the slow down was just because of the crisis and it is after effects, so it started growing again at a good pace.
But if we compare it to the present situation of the real estate. It will take a lot more time to grow again as there is a major slow down already going on the sector. And the demand is already going down day by day.
According to experts there are chances that it will take a lot more time to grow again is another investment strategy.
some people after this lock down are going to opt for almost zero risk fixed deposits. And some people who are willing to take risks are opting for share markets.
As the awareness is increasing day by day in the share market field, and it’s also easy to liquidate.
But in the long term, it will also start to grow. But the government has to introduce some new schemes and cut off the interest rate of the loan to a push to the sector.
For which persons this lock down will be helpful?
According to experts the property will go down around 20%.
Peoples who have job security and have decent incomes have a golden chance as the price will be very less as compared to its real market value. And in the long term it will be a good decision.
As if we look at it for short term than its not a good option. But if we look at it in the long term than it will surely be a good comeback.
Government will also introduce some new schemes to grow the sector and cut the interest in loans
Conclusion
This lock down time because of corona pandemic together with global slowdown is likely to make a negative impact in the real estate market with making a low demand this year.
Slow down and price fall will affect a lot of persons. And the market is directly going to hit hard by this.
For some of the potential customers who have job security. They have a golden opportunity as the prices will be very down and it’s is going to be a good investment. If Your goal is for the long term then its a very good chance. And if your goal is for the short term than you should ignore it.
FAQ
Yes there are high chances of property price coming down in 2020.
It’s an assumption that property price will go down because of the adverse effect of lock down
Yes, this is a good time to invest in real estate. If you have a secure job or an secure business then you should invest in real estate as the price of properties are going down day by day.
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