Millennials may drive demand for affordable houses, post COVID-19

Aditi Wayal

At a time when the Covid-19 has taken an ugly shape and engulfed all the sectors under its grip, it is the millennials that are likely to help widen the demand for affordable houses, once the pandemic settles down in the country.

COVID-19 impact

The impact of novel Coronavirus can be seen across the sectors. In a similar fashion, the pandemic has brought the real estate, which was already faced with lesser demand due to the economic recession in the pre- Covid-19 period, to another economic downturn to it.

While the pandemic surging, this sector will remain subdued for another 6-12 months. The cautionary environment due to the recent pandemic is expected to push back transactions especially within commercial real estate across India. Travel restrictions, weakened currency, liquidity concerns on the back of falling commodity prices will leave a short to medium-term impact on global economic growth.

Strategies of the companies…

The companies are likely to come up with counter strategies to mitigate the impact focusing on cost optimization, liquidity improvement, space design, layout efficiency maximization, re-negotiations of contracts, and calibration of business operating models across the board. According to the consultancy firm (Name of the firm??), IT and business process management (BPM) will continue to drive office space demand, while flexible workspaces will re-evaluate their models as they face major headwinds over the next 9-12 months.

Government Supporting the sector?

It has recommended the government to support the sector by undertaking the measures to enable the sector not only survive, but also perform to its full potential by providing financial support in the form of providing additional funding. Real estate may not yield immediate results, but by being less unstable than the market-driven investments, it is definitely a safer bet in the current scenario.

The demand for residential real estate is likely to increase as millennials continue to be the key demand drivers, their preferences are now dictated by the prevailing uncertainties. Prior to COVID-19, real estate focused on co-owned office and workspaces. But in the current scenario, residential areas are given a bigger preference. The government further reinforced the affordable housing segment by extending the Credit Linked Subsidy Scheme (CLSS) for the middle-income group up to March 2021.

Affordable rental accommodation scheme

Moreover, it opened a new investment class in the form of an affordable rental accommodation scheme for migrant workers and the urban poor. Another trend which will help increase demand for affordable houses is that of reverse migration. It shall spur housing demand in Tier-2 and Tier-3 cities giving developers the option to expand their projects to these markets as well.

The sentiment for investments within real estate remain cautiously optimistic and is expected to see signs of recovery within 12 months. While businesses are experiencing functional problems and reduced capital turns, it is imperative for the central banks and the government to make this “force majeure” event as painless for businesses as possible.

Without federal support, the pain could be much severe and may also result in a sustained economic downturn beyond the immediate 12 months. While the asset pricing across categories will continue to cool off, it is important that buyers are able to quickly enter into these opportunities due to central support on currency, taxation, availability of domestic liquidity through the banking sector and propagation of the deft measures being employed to limit the contagion impact.

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