How will the Real Estate market in South Mumbai be impacted by the Coronavirus pandemic?

How will the Real Estate market in South Mumbai be impacted by the Coronavirus pandemic?

The world has been caught completely off guard by the Coronavirus. It is difficult to imagine that the virus has caused more of an impact on the modern world than war, recessions or even political events. Yet, at the time of writing this article, there are more than 800,000 cases across the world; India has now crossed over 1,200 cases.

Governments across the world are making a coordinated effort to contain the spread and are advising the public to avoid interactions in large gatherings by practising social distancing. These efforts are the need of the hour so that large swathes of the population are not infected, as it can lead to a strain on the healthcare system in each country.

Whilst the action from the central and state governments is a step in the right direction, it begs a question to the mind of a realtor: what would be the potential impact on the real estate market?

Impact on Real Estate

The country has been witnessing a stagflation of the economy over the past few years. Additionally, the following events have led to adverse impacts on the markets:

• PNB Fraud – 2018
• IL&FS Default & Bankruptcy – 2018
• Jet Airways Closure – 2019
• PMC Bank Scam – 2019
• Yes Bank Moratorium – 2020

These events have caused a ripple effect; liquidity, or availability of funds, for several players have been affected. More so, perhaps, for real estate developers, since the momentum of sales has witnessed a gradual decline.

With the lockdown in place to combat the Coronavirus, combined with the liquidity crunch in the sector, the real estate market is looking at a very challenging time in the coming months. Whilst developers of repute and sound financial backing may be able to survive the coming lean months, the risk of defaults may not be unlikely as liquidity is now the largest concern for several players.

South Mumbai Real Estate

The South Mumbai (SoBo) market, which traditionally has seen fewer developments due to limited availability of land, has witnessed several new projects in the last 10 years. Micro Markets such as Tardeo, Lower Parel, Worli, Prabhadevi and Mahalakshmi have experienced a real estate boom and influx of supply across various price segments.

This has been made possible due to large tracts of mill land opened for development, along with a focus on rehabilitation projects for land under the purview of the SRA – Slum Rehabilitation Authority.

Additionally, the development of infrastructure (Bandra Worli Sea Link, Eastern Freeway, Metro, etc.) has led to an interest in development of the eastern micro markets of South Mumbai such as Byculla, Sewri and Wadala.

Across these micro markets, renowned developers have launched projects promising spacious apartments along with the best of modern living in order to attract the new generation of buyers. However, with the combined effect of the slowdown and the lockdown imposed due to the coronavirus, it will be a testing time.

Several developers will now have to adapt to the sudden changes in order to ensure that there is a timely delivery of the property; the availability of the workforce for completion is likely to be creating an impact here. 

Resale Market Supply

The established residential micro markets of South Mumbai have also seen a supply of properties coming in for resale. Areas such as Colaba, Marine Drive, Walkeshwar, Malabar Hill, Napean Sea Road, Breach Candy, Carmichael Road and Peddar Road are witnessing a steady availability. These properties may not necessarily be in landmark societies or have a sea view / open view, however the availability of options in the market could translate to a slower sales cycle for property owners.

Prior to the slump in property prices, the asking rates were generally achievable. In today’s market scenario, an end user will consider various factors of a resale option and will often compare them with newer apartments. These factors can be:

• Ease of access – Connectivity, location, infrastructure etc.
• Quality of development – Interior finish, density of people compared to plot size, society / developer feedback in the market
• Layouts – Ventilation, light, quality of finish (for new projects), apartment condition (for resale)
• Parking Spaces – a strong factor for those who own 2 or more vehicles
• Amenities – older buildings often have limited / no amenities, families with young children may want more contemporary amenities
• Maintenance – New projects typically attract higher outgoings compared with older buildings

The pandemic has also brought hygiene practice to the forefront. Given the sizeable impression this event has and will create on the minds of the people, potential buyers are likely to consider health as a factor for any purchase.

For instance:

• Is the society clean and maintaining waste management?
• Sanitization of common areas?
• Pest Control?
• Efficiency of Housekeeping and Security?
• Proximity to local clinics, hospitals & pharmacies?

Conclusion

The coronavirus pandemic will certainly leave an imprint on future buyers. There won’t be a heavy focus on purchasing a property for an appreciation or investment, but more on the immediate requirement of the buyer.

The sales cycle for the properties is likely to be driven by innovation towards the ease of decision making of the buyer. Virtual walkthroughs of apartments, aerial views of location & apartment views as well as regular updates of the development progress will gain more traction as developers will have to keep potential buyers engaged.

Furthermore, digital marketing efforts will see an uptick as the outreach towards buyers will largely be through the digital platform. The lockdown, whilst temporary, has ensured that the target audience will now be reachable through these mediums as they will constantly be engaged via social media platforms`.