The challenges posed by the second wave of COVID-19 infections in India is likely to derail the real estate sector from the path of recovery. While the demand is likely to go down, sales, too, are expected to take a hit. The worsening situation has triggered waves of a pertinent question - will property prices reduce further in the coming times?

Contrary to the expectations of the masses, property prices in India did not witness any major decline in 2020, in spite of the severe pressure on growth, caused by the COVID-19-led slowdown. However, the market did witness correction up to a certain extent, which coupled with home loan interest rates at an all-time low, improved the housing affordability across the metro cities, including Mumbai, Bangalore, Pune, and Chennai.

While the experts were looking forward to a healthy real estate recovery in 2021, the scenario post the recent spike in COVID-19 cases, and the large-scale migration, is likely to act as a short-term dampener. As the second wave of COVID-19 hits India, causing a wide surge of infections, the full-fledged revival of real estate seems to be a distant reality. Moreover, if there is a full-blown lockdown and the second wave persists for long, it would indeed be a big concern for the real estate sector. The adverse impact on demand for housing, which was just beginning to show signs of recovery, could translate into truncated housing sales. In such a scenario, the buyers are left wondering whether the prices of housing units would crash in the coming days. 


COVID-19 Second Wave: Will property prices see correction in India?
935 Votes.


As per a recent report by Knight Frank, property prices across the top eight cities have more or less remained stable on a quarterly basis in Q1 2021, except Chennai and Hyderabad, that have recorded an appreciation of eight percent and five percent, QoQ. As per Vimesh P, Vice President, Marketing, Casagrand, "As compared to the other major cities of India, Chennai is relatively an end-user driven market. On a quarterly basis, the city has witnessed heightened demand from buyers, and therefore, areas such as Mogappair, Porur, Manapakkam and others along the OMR belt have witnessed an appreciation in property prices up to a certain extent. Boasting of of seamless connectivity, large-scale industrial developments, high rental yields, and excellent resale value, these areas have reported increased affinity from buyers. However, in general, rising cost of raw materials and labour charges have led to an increase in property prices across the city."

Average price change across cities in Q1 2021


YoY Change

QoQ Change

























                                                                                                              Source: Knight Frank

What do the experts say?

As per the majority of industry stalwarts, property prices are unlikely to reduce further as the developers are already working on wafer-thin margins. Vikas Chaturvedi, CEO, Xanadu Realty, in this context avers, “The year 2020 has been a year of consolidation for the Indian real estate sector. While the market did bounce back in Q4 2020 on the back of low interest rates and reduced stamp duty rates in multiple cities, the second wave of COVID-19 has indeed slowed down the momentum of sales, albeit marginally. As seen in the previous quarter, i.e. Jan-Mar 2021, there is still ample demand in the ready-to-move-in segment. This momentum is likely to be maintained even in the ensuing quarters, and therefore, we do not foresee any further correction in prices.”

Echoing similar sentiment, Dhiraj Bora, Head, Marketing and Communication, Paramount Group, says, “Real estate prices are already at their lowest levels. Moreover, the developers are still reeling under the pressure of reduced property prices, increased input costs due to rise in the prices of raw materials, and the general slowdown in the demand. In such a scenario, further reduction in property prices is unlikely.”

Interestingly, the experts had similar opinion in the previous year, when COVID-19 had first struck and led to a two-month nationwide lockdown. For instance, in May 2020, Amit Modi, Director, ABA Corp, and President, CREDAI Western UP, had averred, “Property prices are currently at their lowest, with no substantial increase being seen in the last many years. There is no scope of further correction; even more so because the best possible interest rates are being offered by several banks. Price correction, if at all, is only expected at an individual level, and that too, in the premium segment. Moreover, it will only be up to 5-10 percent on a case-to-case basis.”

Here is what Manju Yagnik, Vice Chairperson, Nahar Group, opines on this matter.

Will property prices rise?

There are also a few experts who are looking forward to a marginal increase in property prices. For instance, Dhiraj Jain, Director, Mahagun Group, avers, “The cost of some of the raw materials has gone up by 200 percent in the last three years, making it unrealistic to cut down prices in real estate. In 2021, we can expect the prices to increase in the range of 5-8 percent across various micro-markets.”

Echoing similar sentiment, Harvinder Singh Sikka, Managing Director, Sikka Group, opines, “Demand and raw material costs are the two most important factors determining the prices, and both these factors have shown an upward movement in the recent past. Even new projects are being launched at higher prices. The developer community has no choice but to increase the prices due to the increasing cost burden. People have started investing in real estate, and the fence-sitters are also entering the market. The coming months will witness a price rise; however, the percentage of change will vary according to the markets.”

Why are prices unlikely to reduce further?

As per JLL, the cost of construction across major cities has witnessed an upsurge of 5-6 percent in the recent times, which can be attributed to the procurement challenges faced by the vendors, a halt in construction activities, interruption in supply chains, rise in cost of raw materials, and increased cost towards health and safety amid the global crisis.

Other than the increase in the construction cost, migration of labourers, decline in buyer sentiment, flattening sales, cash flow issues, and pressure to keep with debt repayments, are some major issues being faced by the developers these days. Although the government has taken some good steps to support the sector in recent times, such as implementation of stress funds and stimulus packages, further reforms are required to help the sector revive. Amid all these issues, reduction in property prices does not seem to be a possibility.


                                                                                                                           Source: JLL

What should the investors do?

While chances of price appreciation or depreciation in the near future are remote, the present scenario provides investors with an opportunity to park their money in real estate at competitive price points, especially since housing finance is available at comparatively affordable prices. A stability in prices for some more time can be cashed upon; however, investors must take note of the construction status and the state of liquidity of developers to make the best choice.