Future of Residential Real Estate Sector after Lockdown

Covid-19 Impact on Real Estate

Covid-19 Impact on Real Estate

The global outbreak of COVID-19 and the resultant lockdown has hugely impacted almost every sector, including the real estate. The future of the industry is still uncertain to some extent. Before the pandemic, the Indian real estate sector was just starting to recover from a major liquidity crisis. The sales of property in Gurgaon, Mumbai, Pune was gradually improving, giving homes to the real estate companies. Let us take a look at how the outbreak affected the real estate sector.

  • Lack of Materials

Previously the real estate builders used to rely on construction materials imported from abroad, especially China. These included electronic equipment, iron and steel, products, construction equipment and more. With all these imports blocked due to the lockdown, the developers are now facing a shortage of equipment. Moreover, the production of these materials in China has gone down, which means they would cost more once the lockdown is over.

  • Lack of Buyers 

Residential property sales have fallen significantly during the lockdown. One of the reasons is that the buyers cannot go around visiting the sites to choose a home. Even before the lockdown was enforced, the number of site visits for an apartments in for sale started to decrease as many were trying to stay at home. Moreover, the outbreak has severely affected the income of a large part of the population while many employed in the private sector fear a loss of employment. As a result, they are saving their money instead of spending it on a new property.

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  • Growing Unsold Inventory

The Gurgaon real estate companies have been suffering from a constantly growing inventory of unsold properties for a few years now. Clearing this inventory is a top priority for the developers but now with property sales dwindling, there isn’t any sign of it. As the properties grow older, they become less attractive to buyers, who usually prefer recently completed homes.

What Lies Ahead?

A number of problems lie in the near future of the real estate industry. However, the situation might also have a few good effects on the industry.

  • Property Rates

Property rates have already started to fall with many developers resorting to distress selling the homes. The sudden fall in demand has forced builders to lower the prices and offer major discounts. While this is bad news for developers or homeowners planning to resell the flats in Gurgaon, buyers would be benefitted as they can now enjoy lower prices. It is expected that the low price trend would continue at least for a while after the lockdown, but then might start to reverse as things start returning to normalcy.

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  • Liquidity Crisis

The real estate was already facing a major liquidity crunch and the situation might now worsen. Before the pandemic, the government has announced a number of relief funds and tax benefits to help the realty sector recover. These included an INR 25,000 crores funding window to help stalled projects complete, tax holidays on profits for the developers and discounts on home loan interests. The severe effects that the pandemic has brought upon on the economy might stall these from being implemented. This implies that the liquidity crisis would continue and possibly worsen.

  • Affordable Housing

On a positive note, the affordable housing projects might see a boost after the lockdown. The government had aimed to provide 1.03 crore affordable residences by 2022 under the PMAY-U scheme. The projects have been completely stalled due to the pandemic and the lockdown, which means that the government is likely to rush it up once the lockdown is over. It is expected that in order to finish the project within the limited time, the government would announce special reforms waivers and sops for affordable homes. Such homes were already high in demand before the outbreak and this sector of real estate would flourish quickly.

  • Indigenous Materials

As mentioned earlier, the blocking of imports has led to a lack of construction materials. The Indian firms can now take advantage of this situation to increase their sales. If they increase their production and start supplying their products to the developers at reasonable prices, it would remove the dependency on China. The Ministry of Steel has already been discussing strategies to boost up the production of special steel. This would not only solve the problem of meagre materials, but would also provide employment to more people. Such measures emphasizing on products made in India can help the Indian economy bounce back after the lockdown.

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  • Investment by NRIs

With nations across the globe undergoing an economic slowdown, the investment opportunities are falling. NRIs, especially those living in the US and Europe are starting to look back at the real estate properties back home for investment. This has led to an increase in the number of NRI investors buying properties in Gurgaon. Moreover, as the value of the Indian Rupee has fallen drastically, it also makes this a good time for them to buy a property in India.

  • Digitalization

In order to adapt to this difficult situation, a number of developers have taken up digital platforms to promote and well their properties. Several reputed builders have been providing virtual tours and video conferences as the buyers aren’t able to visit the sites. Some developers are even providing special time slots during which the investors can visit the sites one by one. Even property deals are now being completed online in order to reduce physical contact and to get around the problem posed by the lockdown. It can be observed that the developers that have gone digital are performing significantly better than the ones that didn’t. It is expected that the trend would continue after the lockdown too, as more people would start to realize the benefits and conveniences of the digital processes.

For now, the demand for residential and commercial properties is very low, but the situation might improve in the future. If the developers take up measures like launching e-brochures, online sealing of deals and video walkthroughs, they might survive in the market.

About Sashi 533 Articles
Sashi Singh is content contributor and editor at IP. She has an amazing experience in content marketing from last many years. Read her contribution and leave comment.

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