Indian house prices will fall for the first time in at least a decade this year and next, as the coronavirus pandemic causes massive job losses and weighs on demand and the economic outlook, a survey by Reuters news agency. The country’s real estate market was hampered by a cash crunch even before the coronavirus outbreak, which has already infected more than 350,000 people in the world’s second most populous country.
Last year, house prices in the country rose 3.3% on average, trailing an average 3.7% rise in consumer prices and marking the weakest year since the Reserve Bank of India started tracking the market in 2010.
The June 10-18 Reuters poll of 13 analysts predicted average house prices to fall 5.0% in 2020 and 3.0% in 2021, reversing expectations of a March poll for increases of 2.0% and 2.5% respectively.
âFor the housing industry, COVID-19 could not have come at a worse time. Many aspiring homebuyers were on the verge of shopping when an avalanche of uncertainties hit and forced many to end of indecision, âsaid Anuj Puri, President of ANAROCK Property Consultants in Mumbai.
In a worst-case scenario, prices nationwide are expected to fall 12.0% in 2020 and 10.0% in 2021.
In the country’s two largest cities, the financial capital Mumbai and the national capital Delhi, house prices are expected to fall 7.3% and 7.0% this year. These cities, each with a population of nearly 20 million, have the highest COVID-19 infection rates in India.
Despite the government’s 20 lakh crore ($ 262 billion) economic stimulus package and a cumulative 115 basis points of interest rate cuts by the RBI, all but one of 11 analysts said a recovery housing market would be slow and long.
Lack of demand and high unemployment were cited by nearly all analysts who responded to the survey as the biggest hurdles for the housing market in the coming year.
Several housing projects have stalled as the reverse migration of a large chunk of construction workers out of major cities leads to labor shortages, a trend some analysts say will likely continue.
“With migrant workers leaving urban centers during the lockdown, resumption of activity on the supply side is highly dependent on the speed of labor availability and distribution,” said Arvind Nandan , Managing Director of Research at Savills India.
“It is probably the primary driver, as well as a delay factor, for post-pandemic production.”