Will WFH help real estate sector come out of the woods?

The coronavirus pandemic has ravaged almost every sector and real estate is also bearing the brunt of its impact. However, it is not all doom and gloom for the sector in the second wave as stakeholders believe demand will come back soon as the restrictions are lifted.

Anil Pharande, CMD, Pharande Spaces, feels that demand may remain slow for a few months but pick up again as soon as cases recede.

The sector is betting on first-time homebuyers and upgradation by many existing homeowners.

“Many are looking to shift to outlying areas where they can buy bigger homes and live due to work from home facility,” said Pharande.

The housing market recovery after the second wave will again be the fastest among other sectors. We may see some green shoots from the third quarter of CY 2021 itself if a convincing downward trend in cases sustains and vaccines are rolled out more widely, he added.

Demand

Experts say that with the second wave of Covid-19, a relatively younger population with many middle-class denizens has been affected the most. In this scenario, while there is ongoing demand from the upper-income bands within the middle class, priorities are currently skewed towards cash preservation to meet possible medical exigencies.

Owing to this, affordable housing may take longer to recover.

“As for recovery, the middle and upper-middle-income housing segments will bounce back fastest. When cases reduce and the economic impact of the pandemic subsides, middle-income homebuyers will return to the market for value buying. However, affordable housing will continue to face a grim situation. MSMEs have been adversely affected by both the first and second wave, and this directly impacts the affordable housing segment,” he said.

Property prices

The current temporary slowdown in housing demand because of the second wave has got expectations going for a price correction.

“The reality is that developers will eventually be forced to increase property prices if the current rising inflationary trends continue. While demand may be low, the operating costs for developers have already gone up hugely during the second wave,” said Pharande.

Many of the larger players are providing additional safety protocols to their workers on-site, paying for their vaccinations and other medical needs, etc. Additionally, raw material costs including cement, steel and even labour cost have all gone up in recent times. This will ultimately cause developers to pass on the extra costs to the homebuyers, he continues to add.

WFH impact

Due to the surging Covid-19 cases, most of the companies have once again resorted to a hybrid working model. As a consequence, the demand for bigger homes has exceeded all the expectations because people are now preferring homes where they can build their work from home setup.

“Many companies will adopt the rostered work concept wherein employees can come to the office for some days of the week and work from home on other days. In short, the demand for bigger homes will continue so there is little justification for developing smaller units,” Pharande added.