The ongoing COVID-19 pandemic has gravely impacted almost all the sectors of the economy across the globe.
The automobile and real estate sectors are no exception to the same. A sharp decline in the demand and sales of cars and residential houses in 2020 substantiates this fact.
Let us deep dive to understand the rationale of the consumers behind this decision.
No Capital Expenditures
Owing to the blow to their disposable incomes and savings, people are sceptical about incurring capital expenditures such as purchasing a new car or buying their dream house during these times.
There is a significant change in the mindset and attitude of customers towards their financial resources. They intend to focus on maintaining adequate liquidity and purchasing essential commodities only.
They do not want to block their incomes and savings in loan EMIs (equated monthly instalments) of luxury purchases in the present scenario that may have a long-lasting impact on their future earnings.
The acute slowdown caused by the coronavirus pandemic has raised doubts in the minds of people and investors. Job uncertainty or insecurity has made them risk-averse and reluctant to invest their hard-earned money in financing new cars and houses.
Pessimism about credit availability and terms of loan financing from financial institutions during the present economic recession period is further delaying their decisions to invest in riskier ventures.
Mobility of people got restricted during the entire lockdown period in the country. With work-from-home for service professionals and online classes for students being the new normal, people are confined to their homes.
This restricted mobility has led to a decline in the purchase of new as well as used cars. A majority of the migrant professionals shifted back to their home towns further impacting the demand for new cars and houses.
Disruption in production and xonstruction
With migrant labourers shifting back to their hometowns, car manufacturers had to shut down their production facilities to abide by the lockdown orders.
Construction activities of real estate projects also halted for nearly six months. It led to disruption in the supply chain and delivery of cars and incomplete inventories of housing projects, further impacting the demand for residential houses and new cars.
To conclude, the pandemic-induced economic recession has witnessed a significant decline in the demand for new cars and houses across Indian cities.
Indians are now looking forward to the Budget for relief and concessions so that they have enough money in their hands to invest in real estate and buy cars and white goods.