Coronavirus outbreak which started in Wuhan, China are now spread across 205 countries. And now it’s starting to spread India. It impacted the daily life of billions of people. Coronavirus has infected 1,130,814 and took over 60,149 as of writing this Blog. Many World Economy, businesses, trade cycles, and the industry are impacted by the deadly COVID-19 virus. Thus halting the global economic activity significantly.
And its recent spread in India has impacted every business segment severely. And this coronavirus has created a very negative impact on the Indian real estate industry like –
• new launches have been put on hold
• construction activity is stopped
• site visits are put on hold
• The property sale is plunge tremendously
In this blog, we will focus on the Coronavirus aka COVID-19 pandemic impact on various segments of the Indian real estate industry.
Impact of coronavirus on Indian Real Estate Developers
The real estate sector which is already struggling to re-emerge from past turbulence of structural changes, policy reform, and liquidity crisis is now set to another fallout. And now this coronavirus outbreak severely impacted the business sentiment. The ongoing crisis in the country’s non-banking finance sector, which the main source for housing sector funding, made money borrowing very difficult, hence risk their plans to deliver the projects within the promised timeline.
Developers are sitting on unsold unit worth approximately 6 Lakh crores as of January 2020
All construction activities are stopped amid lockdown in India to contain the virus spread and also there is a delay in the supply of manufacturing material and equipment from china and from various countries. It pushed the delivery timeline of ongoing projects and hence it increases the cost to the developers
“The pandemic menace has hit at a particularly sensitive time. Across realty companies, this is the time when statutory payouts and streamlining of balance sheets happen. In this challenging time, we have asked the government for some economic interventions like rescheduling loan repayments, a one-time rollover for debt restructuring and deep interest rate cut,” Hiranandani added.
Government is expected to launch support for developers in order to bring down the losses developers will suffer of the coronavirus spread, which includes force Majeure clause to skip the penalty on project delay and three month EMI holiday for developers during the sensitive period to offset their losses
To relieve the developer community during this covid19 outbreak, Maharashtra’s real estate regulatory authority on 2 April has announced For all MahaRERA Registered projects where completion date, revised completion date or extended completion date expires on or after 15th March 2020, the period of validity for registration of such projects shall be extended by three months. MahaRERA shall accordingly issue project registration certificates, with revised timelines for such projects, at the earliest.
Further, the time limits of all statutory compliances in accordance with the Real Estate (Regulation and Development) Act, 2016 and the rules and regulations made thereunder, which were due in March / April / May are extended to 30th June 2020
Impact of coronavirus on Indian Real Estate Housing market
The recent past, the center had announced higher tax breaks and the much lower interest rate on home loan makes a home purchase more easier..apart from this measure government announces a 25000 crore stress fund for unsold stocks. Housing demand slows down in the residential property segment has already shrink project launches, housing sales, and price growth factors on India residential realty segment which is under pressure caused by major changes in real estate Regulatory Authority (RERA), GST changes and property laws.
Proptigher data shows there property sales in India’s nine top residential; the market fell 30% in October -December period in 2019
The recent announcement of RBI on March 28 gives a three-month moratorium for loans that will provide some minor relief to consumers and also to developers due to coronavirus outbreak.
Impact of coronavirus on Indian Real Estate Homebuyers
Coronavirus has created a tremendous negative impact on homebuyer confidence in the market and its purchase decision has shifted. The homebuyer is likely to shift their property decision as they wait for clarity for there job security. And recent changes in the interest rate and high tax exemption ha provided some changes to consumer behavior but due to the coronavirus outbreak that behavior is likely to halt that changes for the long term. Delay in the supply of construction material and labor shortage affects the delay in the timeline of ongoing projects.
As site visits are nearly out of the question by potential homebuyer as a result there are postponing their purchase decision,
Hiransdami says “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,
It ios face that many prospective homebuyers will wait for clarity for job security during this pandemic
Even though recently after lockdown RBI announce a 75 basis point repo rate cut which brings back the rate to 4.4% this positive step will make buyer sentiment would be seen only for the long term. However, this step will make a major reliever for existing buyers who are struggling to pay EMI for the short term.
There is the increased usage of digital medium fore house hunting, project shorting and cheaper home loan,
Impact of coronavirus on Indian Residential Real Estate Market
Recently COVID 19 virus is spreading like a fire in India. It created a heavy impact on every sector of the economy but as far real estate I concerted it impact is severe.
See. India heavily depends on the import of construction equipment and material from chine and another country around the world. But China has a large portion of imports. India imports heavily iron and steel products, plastic and fiber products, electronic equipment, technical construction equipment.
This heavy dependence on steel and steel products creates a negative impact on the country. As production is going down, the price of other allied industries is bound to increase. Hence increasing in cost and reducing in the profit margin of residential real estate developer, builder and consecutively consumers.
According to India rating agency, residential real estate property is likely to decline in the financial year 2019-20 after showing a minor improvement in FY2017-19
Reccentisl sales across all top six cities in India is fell 4% YOY to 204 million sq ft in Apr-Dec of FY20 from 279.6 million sq ft in 2019
Impact of coronavirus on Indian Commercial and Retails Real estate market
The commercial market has been the star in India’s real estate segment. Growing at a rapid speed as more and more MNC, corporate and startup looked to have a big presence in business parks of Bengaluru Gurugram Chennai and Hyderabad. Experts strongly suggest that it would impact this industry indirectly. Talking about the impact of the viral outbreak on the retails and hospitality industry. Ankush Kaul, President, Sales and Marketing, Ambience Group, shares, “The footfall in malls operated by us has come down by 30 percent due to the outburst of COVID-19. We also have multiple hotels that are witnessing increased cancellation by parties. In April alone, we had several bookings, but the majority of these are under cancellation as of now.” The recent rise in COVID 19 cases can have severe impact retails consumption as people started the avoid going out as government of India declared nationwide lockdown especially F&B, entertainment center, and shopping malls.
Many companies worldwide are working from home, Consequently, office utilization rate may fall as remote work increase.
As per to recently released report by colliers, the explosion of coronavirus pandemic might slow down the momentum of office space consumption in 2020.
As coronavirus pandemic is spreading rapidly in India., as of writing this blog over 2889 people is infected and 75 people have lost their lives in India. A far as the real estate industry is Concern, it needs to brace itself for worse impact than previously thought. Coronavirus has created a threat to human lives, the real estate sector is already seeing a decrease in property visits, worst sales, and buyer interest. The Indian Real estate sector and its allied industries should find positive in the worse scenario.
The government is working very hard to contain the spread of the virus and every sector should uphold itself in times of crisis.