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COVID-19 impact:The great suburban shift

With work-from-home continuing, buyers are taking advantage of a low mortgage regime to buy houses in the suburbs, willing to commute longer for the sake of affordability and bigger spaces.

Representative image

Representative image

In the US, people who live in pigeon-hole rented spaces in the metros have started buying property in the suburbs, where prices are affordable. They’re willing to travel the extra distance once offices reopen after COVID-19 wanes.

Walking to work and higher property prices in the metros are gradually giving way to longer commutes and affordable prices in the outskirts of town.

Buyers don’t seem to mind. They get more space and better facilities at lower prices. With work-from-home likely to continue for some time, they don’t mind making the occasional twice-a-week commute to their offices in the central business districts, if it comes to that.

The scenario in India is no different. Here, too, buyers now prefer the longer commutes and affordable bigger homes to expensive rental accommodation near the workplace.

Take the case of Jayant Sharma, a pilot. After the family house in New Delhi’s Paschim Vihar was sold for Rs 8 crore, he bought a three-bedroom apartment on Golf Course Extension Road in Gurgaon with his share of Rs 2 crore.


A management professional working in Cyber Hub in Gurgaon moved to Dwarka Expressway, where he bought a three-bedroom unit for about Rs 1.5 crore. He earlier paid rent of Rs 45,000. His commute time has increased to about 50 minutes from 20 minutes, but he doesn’t mind.

There’s another trend playing out. Before the pandemic, home prices in metro areas, especially those located close to offices, had been rising. However, rentals have dropped as people shifted to the suburbs and capital values have declined. This has proved attractive for a small set of people who purchased property in the periphery earlier and can now upgrade to locations close to the commercial districts.

Pankaj Shah, an economist working in Mumbai, sold his two-bedroom house in Kandivali and upgraded to a three-bedroom property in Andheri. The owner was desperate to sell the property as rental yields had declined.

In the post-pandemic world, the peripheral areas of cities are front and centre on the radars of homebuyers. Many such micro-markets, where demand was muted before the pandemic, are now seeing renewed demand and supply. The desire to live in or close to the heart of the city with offices and schools nearby has faded with the advent of working and studying from home.

“Homebuyer preferences have changed perceptibly,” said Anuj Puri, chairman of Anarock Property Consultants. “Developers quickly changed track and those with land banks in the peripheries, and even otherwise, saw it as an opportune time to launch new projects there. It’s very likely that some of the major office occupiers will soon decentralise and bring their offices closer to their employees’ homes in these peripheries.”

Mani Rangarajan, Group COO of, and, agreed, saying demand surged after the first wave of COVID-19.

“It is a sheer question of affordability and the amenities available within the neighbourhood. People are looking at larger houses and with the mortgage regime and interest rates being low, affordability has increased,” Rangarajan said. “Healthcare infrastructure has gained importance during the pandemic and proximity to the same is becoming the most sought-after amenity.”

New launches concentrated in peripheral locations

It’s not surprising, then, that new projects are concentrated in peripheral locations. According to JLL India, new launches in the Mumbai residential market increased by 33 percent to 6,143 units in the second quarter of 2021 from 4,616 units in the first quarter.

While sales in the city remained at about Q1 levels, transactions were mainly in the range of Rs 50 lakh to Rs 1 crore, equivalent to 40 percent of sales.

The eastern suburbs accounted for 25 percent of the new projects, followed by the western suburbs II (comprising Malad, Kandivali, Borivali and Dahisar) with 22 percent. Thane and Navi Mumbai combined reported almost 50 percent of sales.

About 84 percent of the launches in Mumbai were in the affordable and mid-price segments (up to Rs 2 crore). Developers are expected to focus on these segments, the analysis showed.

“There is a diffusion taking place in the property market these days… With work-from-home, people are now moving to peripheral locations not to take a house on rent but to buy,” Pankaj Kapoor of Liases Foras said, adding there is traction in tier-2 cities and near the hometowns of people who left the cities after the lockdown.

While new demand may have shifted to the periphery, there’s also been a trend reversal in some places with demand for home upgrades. Some attractive deals are on offer in the metros, where investors are desperate to sell after rents fell.

Rentals have contracted 15-25 percent in most locations after the pandemic, Kapoor explained. Right now, it’s only 1 percent of the top management who can afford to take a unit near the workplace. The rest are moving to the suburbs.

Hybrid office model to push suburban realty

While work-from-home continues for some companies, others are considering hybrid work models – work from home and office; work from anywhere and office, and work from near home and office.

“Many occupiers are exploring the distributive office opportunity, the hub-and-spoke model, as part of their hybrid work strategy in addition to minimising their capex and fitout costs,” explained Samantak Das, chief economist at JLL India. “They are looking for smaller offices in the periphery to be utilised as spokes where already traction for residential sales has been observed and most of the employees are residing.”

He said the shifting of offices would result in more people scouting for homes in the peripheral areas.

The shift is similar to companies that moved from Nariman Point in south Mumbai to Bandra Kurla Complex in the north a few decades ago. The entire western and central suburbs in Mumbai came after this shift.

However, the top management of these companies continue to live on Nepean Sea Road, an upmarket neighbourhood near Malabar Hill in south Mumbai. Gurgaon’s expansion also followed the trend of offices shifting, said Das.

If companies set up spokes in peripheral locations, not only would housing demand in these areas increase, the commute time to these work-near-home offices will also reduce, he said.

Ritesh Mehta, senior director and head - west India, residential services, at JLL India, noted that the shift to peripheral locations has affected rentals near CBDs.

“A buyer paying a rent of Rs 1 lakh near the CBD now prefers to purchase an asset worth Rs 3 crore in peripheral locations such as Kandivali, Malad, Chembur, Matunga, Santa Cruz or Vile Parle,” he said.

Before the pandemic, CXOs of most companies located in BKC would live in areas such as Kala Nagar, paying rent of about Rs 2 lakh per month. The value of houses in this area is almost Rs 7 crore. Mid-management executives stayed about 3 km away in areas such as Kalina, Chembur and Matunga where they shelled out rent of about Rs 1 lakh. Now, they don’t mind buying a house worth Rs 4 crore and paying an EMI of about Rs 2.5 lakh.

Some mid-management employees would live in areas such as Santa Cruz, where the capital values ranged from Rs 3 crore to Rs 5 crore and rentals were Rs 50,000 to Rs 70,000.

“These people are now considering purchasing apartments in areas such as Goregaon or Malad or even Santa Cruz,” Mehta said.

Having said that, the top management may continue to stay put near BKC as they have a lifestyle and an address to live up to.

Gurpreet Ratra, executive director of T and T Realty Services in Gurgaon, said in the National Capital Region, there is traction in Dwarka Expressway and New Gurgaon (Sector 82 to Sector 88), where people are buying apartments after selling their properties in Dwarka and other parts of New Delhi.

“Budget and affordability are the focus now. People don’t mind driving an additional 30 minutes to live in bigger housing units in areas such as New Gurgaon or Dwarka Expressway,” he said.

Brokers in Noida confirmed the trend of people buying properties along Noida Extension and even along Yamuna Expressway. In Bengaluru, a similar shift is evident. People are purchasing properties in affordable locations such as Devanahalli near Kempegowda International Airport, south Bengaluru electronic city in Jigani area and Sarjapura.

Some are buying larger units and villas that cost Rs 1.7 crore to over Rs 3.5 crore in locations within 2 km of Outer Ring Road, which are an hour away from the main commercial district, brokers said.

Another trend is of traders picking up apartments in central Bengaluru at discounted prices from investors desperate to sell.

Rentals in the main city have dipped by 25-30 percent for properties in the Rs 50,000 and above category. Vacancy levels in the Rs 35,000, affordable rental segment are high as most people have gone back home, local brokers told Moneycontrol.
Vandana Ramnani
ISO 27001 - BSI Assurance Mark