Given the large population of the country, and uneven healthcare systems, it would require a huge collective effort to tackle the challenge of mass quarantine.
Although India is handling the situation with mass efficiency, the future looks uncertain about where the pandemic will lead the country’s economic scenario.
As the days are going by, the real estate sector has taken a major set back.
PropTiger.com data shows housing sales in India’s nine major cities declined by 30% in the period
The sector was already facing some liquidity crunch since payment defaults by IL&FS Group in 2018. That, along with the economic slowdown due to coronavirus will cause a huge problem.
The effect of labor issues
Housing and real-estate is an employee-based sector. Now with workers stay on payrolls and the majority of the contract workers have left for their hometown due to lack of work, the situation is growing tense.
According to a statement given by Niranjan Hiranandani, president of National Real Estate Development Council, “The human resource is largely still at construction sites, and instead of keeping them in a ‘lockdown’ situation, giving them some activity will also keep them occupied—as also help avoid major economic losses as a result of the stoppage of work at sites,”
How will businesses get impacted?
Even for well-funded projects, the property could delay upto years due to low cash flow in the future.
It has been said that 4.66 lakh units across the top seven cities that were slated for completion in 2020 face high risk of delays, many of them stalled for unprecedented time.
Also, repayments for dues will be staggered until the stakeholders come together to firm up a repayment plan.
According to Hiranandani’s statement, Salvaging Indian realty, the second-largest employment generator is critical, not only from the GDP growth perspective but also for employment generation, since the sector has a multiplier effect on 250-plus allied industries.”
Recently, the center had passed higher tax breaks and low-interest rates on homes to make purchases easier along with setting up a Rs 25,000-crore stress fund for stuck projects.
Reportedly, if the pandemic is not contained soon, not only it would affect the economy but also hit the developer’s cash flow and delivery capabilities hugely.
What about commercial real estate?
The loss of the travel and tourism industry has also led to the hospitality sector facing losses, with many travelers deciding to cancel their bookings.
Till now, the commercial real estate has been at the top of the real estate market. Now with the pandemic, corporate occupiers would postpone taking up spaces till the time the current scenario is under control.
The whole pandemic has mostly spread like a wildfire in the urban areas mostly brought by international travelers. Therefore, the entire system os urban population with such a huge density of population, we will be looking at some potentially massive problem.
It is important to strategically rethink spacing out our urban planning approach making sure that we have a well-articulated master plan which connects proper infrastructure.
How is this impacting the home buyers in India?
Initially, the low-interest rate which goes as low as 8% now on home loans and also high tax exemption, the consumer behavior that was supposed to change, has seen a halt at least for now.
Regarding the home buying situation, Hiranandani said, “With the Coronavirus pandemic impacting all sectors of the economy, troubles have compounded for India’s realty sector which has been dealing with a ‘challenging scenario’ since the economic and policy reforms were introduced. The slowdown since February-end is apparent; and while site visits are almost non-existent, the decision-making process is hugely delayed,”.
However, RBI has recently announced a 75-basis-point repo rate cut to slow down to 4.4%.
Any positive effect will only be seen in the medium to long term.
This step is a great initiative for existing buyers who might be struggling to pay EMIs in the short term due to the lockdown throughout the country.
What are the effects on other property developers in the country?
Due to the pandemic, many companies have announced the possibility of working from home to replace office spaces in the country.
While, as a whole, that might be a designated solution but for now, a near-term jolt to the commercial real estate in India is unavoidable.
Also, for malls, lower footfalls and subsequent debts will impact developers’ debt servicing against the project. Even relaxation from banks won’t be enough for them to survive in an already diminishing market.
All of this depends on how efficiently we handle the situation that is about to come in the near future.
As the world waits, there is tremendous pressure on India to contain the virus as soon as possible.
We have to stay positive by increased production and innovative solution. In the past, India has already witnessed a far worse situation than COVID-19 and have successfully bounced back.
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Till then, maintain the WHO guideline to protect your loved ones. Stay indoors stay safe.
