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Unlock 2.0: What lies ahead?

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UNLOCK BEGINS

The Maharashtra Government has announced a phased unlocking in the state classifying the districts and cities based on the COVID positivity rate as well as the availability of oxygen beds. This seems to be a well-thought-out plan which takes into consideration the severity of the situation on the ground as well as the level of preparedness to handle the same.

Based on the above parameters, the districts and cities have been divided into 5 levels. Locations falling within the Level 1 parameter will have the least restrictions whereas Level 5 will have the maximum restrictions. Based on the above Mumbai falls in Level 2 whereas Thane falls in Level 1.

5 LEVEL UNLOCK PLAN

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KEY HIGHLIGHTS FOR MUMBAI [LEVEL 2]

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CURRENT STATE OF MUMBAI RESIDENTIAL RENTAL MARKET

December 2020-February 2021

The rental market had started recovering significantly from December 2020. There had been a correction of 5-15% in the rental values in the previous months but the number of transactions had quickly picked up.

March-May 2021

However, the rental market had started weakening from March onwards based on the number of enquiries in the market and also supported by the data on registrations depicted in the chart below. Do note that there is a 15-30 days lag between transactions and registration of the supporting agreement.

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EXPECT SOME IMPROVEMENT IN NEAR TERM

SOME POSITIVE SIGNS

We have seen positive indicators in the rental market starting last fortnight of May 2021 as measured by the number of enquiries generated. While the absolute numbers are still subdued, it reflects a good reversal of trend following a period of absolute standstill in enquiries

PENT UP DEMAND WILL LIKELY PROVIDE A BOOST

With a significant opening up from June 7, 2021, we expect things to improve significantly. We expect the housing societies to ease restrictions on the entry of external visitors, which would help in translating the pent-up demand into demand viewings and subsequently into closures as well

UNCERTAINTY PREVAILS IN THE MEDIUM TERM

3rd WAVE

There is an ongoing concern and trepidation on a potential 3rd wave of coronavirus. In the absence of any predictions on the likelihood of the same along with the potential impact, we do not expect several companies in the impacted sector to hire significantly in the near term.

RETURN OF EXPATS AND BACHELORS

The expatriates and the bachelors constitute a significant chunk of the rental market demand. We do not expect significant inward movement from either segment in the near term. This will keep the demand muted for rental apartments.

OPERATIONAL CHALLENGES TO CONTINUE

The operations have been severely impacted in the last couple of months on three counts

(a)Migrant labour moving back to their native places,

(b)Reluctance of labour to operate in locations that require a negative report to commence work. This had resulted in spike in operations cost and

(c)Operational workforce that was quarantined themselves due to positive cases in their immediate family

The above factors resulted in spike in prevailing day rates which jumped up to Rs900-1000 from Rs500-600 earlier.

We expect the operational challenges to continue in the near term due to a shortage of labour and handymen. This will also keep the operational costs high until the supply issues become manageable.

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