The national lockdown to limit the spread of the novel Coronavirus/COVID-19 epidemic has hindered all businesses in India, excluding the essential daily services for human survival.
And activity in the realty sector—among the top contributors to the nation’s economic growth—has halted ever since 1.36 billion people went under severe lockdown since March 24.
It is difficult to think of a business that has not been impacted by the COVID-19 pandemic.
However, for the Indian real estate sector, the impact of the crisis has become a double whammy.
The industry, especially the residential segment, has already been struggling with project delays, regulatory changes, and low sales- leading to unsold inventories due to liquidity crunch for the last few years.
That, coupled with an economic slowdown, stalled a nascent recovery in the sector from the disruption caused by Prime Minister Narendra Modi’s demonetization and stricter housing law.
Here are three factors, which, according to analysts and company executives, that are impacting the industry the most.
Corona virus impact on real estate project delays
Real Estate Sector contributes to 13% of the national GDP, is the second-largest employer in the country, there is a very bad effect on India’s real estate and has a direct effect on around 250 allied industries.
Hence, it is of utmost urgency that the Government relaxes specific regulations to help the builders fulfill their commitments.
As per the information, the Maharashtra RERA has proactively extended timelines, the RERA Authorities in other states are yet to formulate any revisions or policy decisions concerning the impact of COVID-19 on the real-estate industry.
According to a report released by Anarock Group on the effects of COVID-19 on the Indian Real Estate Sector, well-funded projects could take several months over and above scheduled deadlines to be completed. In contrast, other projects could be delayed by two years.
It has also been reported that an entire 15.62 lakh ongoing-construction homes are being affected by the complete lockdown, with 57 percent of these units in the NCR and Mumbai Metropolitan Region.
Moreover, another industry body, National Association of Real Estate Developers Council, has urged the Government to allow construction work at project sites subject to adherence of safety measures and lift the lockdown on the same.
The said request has been made to minimize losses, and for finishing urgent maintenance and facilities like rainwater harvesting pits, storm drains, etc. before the onset of the monsoon.
If you are a homebuyer, who was expecting to get possession of their house anytime soon, get prepared to keep paying both the rent and EMI’s for a few additional months, as project deliveries will get suspended.
Given the lockdown situation, construction in incomplete projects has come to a complete standstill across the country.
The key substantial for real estate is what could happen to company margins if workers stay on payrolls and how companies would get back the contract workers who have migrated back to their hometowns in the absence of work, many companies stated.
Since trains have stopped running and state borders sealed, migrant workers aren’t able to return. Hence, getting the labor back would not be a significant issue once the lockdown is over.
Other companies said they discouraged and provided shelter and food for the laborers stuck at the sites with medical ailments with the help of local authorities.
“The life stake for labors 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,” Niranjan Hiranandani, president of National Real Estate Development Council, said in a statement interviewed by BloombergQuint.
Experts and developers believe that prices will seemingly remain the same though the expenses may go up. “There will be no change in prices as transactions are not taking place.
The prices will resume at the same level,” said Mohit Goel, CEO, Omaxe Ltd, a real estate developer. Niranjan Hiranandani, national president, National Real Estate Development Council (Naredco), a real estate developers’ body, agreed.
“In the primary market, I do not foresee any major differences. The market scenario has been challenging, and possible discounts have already been introduced into the current pricing.
I do not see the option for any further rate reduction,” he said.
It would be insane not to mention the immediate policy actions initiated by the Government and relevant Authorities which have brought about some relief in light of the subject pandemic:
- The Ministry of Corporate Affairs vide its Notification dated March 24, 2020, has increased the limit of default from Rs. 1 lakh to Rs. 1 crore as specified under Section 4 of the Insolvency and Bankruptcy Code, 2016.
- Reserve Bank of India has allowed every bank to declare a three-month moratorium on all term loans outstanding as on March 01, 2020, as well as on working capital facilities.
- The Maharashtra Real Estate Regulatory Authority by its Order No.:- 13 / 2020 dated April 02, 2020, has revised Project Registration Validity and Extended Timeline for Statutory Compliances, given COVID 19 Pandemic.
- For all registered projects where completion date, revised completion date, or extended completion date expires on or after March 15, 2020, the period of validity for registration of such projects has also extended by three months and project registration certificates with revised timelines for such projects would be re-issued consequently.
- Further, the time limits of all statutory compliances following RERA due in March, April, and May extended to June 30, 2020.
India will witness a slowdown in the current and coming quarters. However, it will stand to benefits post-recovery as always.
If you have previously bought a house and are waiting for possession, get prepared for a delay.
If you are considering buying one, wait for the situation to calm down since the prices and inventory are unlikely to change.