Can Reverse Migration Spur Housing Demand in Tier-2 & Tier-3 Cities Post-COVID-19?
Indian real estate is bracing itself for a very new post-coronavirus (COVID-19) world. One significant trend may be reverse migration spurring housing demand in Tier-2 and Tier-3 cities, says a research report.
According to a report 'India Real Estate: A Different World Post COVID-19
' by Anarock Property Consultants, cities like Lucknow, Indore, Chandigarh, Kochi, Coimbatore, Jaipur and Ahmedabad would be the main beneficiaries of the reverse migration of professionals who have lost their jobs in the metros, or are likely to. These returnees will benefit from the cost of living and superior infrastructure that many Tier-2 and Tier-3 provide.
At present, top seven cities account for almost 70% of India's residential market, with the remaining 30% accounted for in Tier-2 and Tier-3 cities. This ratio may well change in times to come.
According to Anuj Puri, chairman of Anarock Property Consultants reverse migration is already very visible among migrant labourers, and this trend can further percolate to skilled professionals who have been or may be off-rostered.
He says, “Smaller towns and cities would consequently see a spurt in housing demand. Primary demand may skew towards rental housing – purchase demand would initially come from local investors keen to meet the rental demand.”
“Many non-resident Indians (NRIs) will also return to India amidst dwindling job prospects, particularly in the US and European nations, which account for nearly 70% global cases. For them, the top-7 cities would be the best options but many will consider smaller cities where they can be close to their families. Finding suitable employment for reverse-migrating Indians in smaller cities may prove to be challenging," Mr Puri added.
• ANAROCK’s recent consumer survey
taken during the lock-down period indicates that of the respondents who preferred to invest in Tier-2 and Tier-3 cities in 2020, 61% are end-users and almost 55% are aged under 35 years.
• At least 47% of respondents are focused on affordable properties priced within Rs45 lakh, followed by 34% who are looking for mid-segment homes priced between Rs45 and Rs90 lakh.
• The residential segment will see a manifold increase in demand for townships projects, which offer a controlled environment.
• In terms of supply, township projects have less than 5% overall share in the top-7 cities as on date.
• Further market consolidation is expected with the increased preference for branded developers. Financially strong organised players are likely to occupy 75%-80% market share in the coming years.
According to the research note, in office real estate, social distancing norms may increase the per capita office space allocations even as a segment of employees will work from home. During the past decade, per capita office space allocation reduced from 100-125 sq. ft. to 75-100 sq. ft. in the pre-COVID-19 period of January 2020.
“Safety and hygiene will become the top priority, even as contactless operations and automation will increase. Decentralization of operations to ensure business continuity will be a trend reversal from prominent consolidations over the past few years,” the report says.
In retail, Anarock sees online businesses gaining momentum. It says, “eCommerce giants have already added over 5,000 people to their delivery fleet during the lock-down period. Their consumer base expanded to senior citizens who have embraced technology in the COVID-19 era.”
Malls have been shut for over a month and sales have nose-dived. At the same time, local shops have gained customer confidence. “Reopening the malls remains a challenge. Mall revival will come with caveats. With hygiene and sanitation taking centre stage, malls which can offer these will benefit most in times to come,” Anarock added.
According to the property consultancy firm, while every segment in realty has been affected due to COVID-19, warehousing, industrial and logistics as well as data centres would be the first to recover from the impact in one to two quarters.
The possible recovery time for residential and commercial officer market would be four to six quarters, while hospitality, alternatives like co-working, co-living and student housing and retail would take more than six quarters for recovery from the COVID-19 impact, the report says.