How would the Indian real estate sector respond to COVID?
With the economy slowly opening up after the coronavirus-triggered lockdown, a new question about the future of the economy appears on the horizon. Well, there is hardly any sector that has not been impacted by COVID-19 (coronavirus). Same goes for the real estate sector in India. We discuss the prospects of the real estate sector -COVID in this article.
Overview of the real estate sector in India before COVID
The real estate sector in India had been reeling even before the advent of COVID-19 due to compliance, demand, financing, and labour shortage. To escalate the issues, activities in the real estate sector came to a complete halt during the lockdown.
Now, with the economy slowly opening up after the coronavirus-triggered lockdown, you would be interested in knowing what the post-COVID era looks like for the Indian real estate. While the answer to this question is not black or white, here are some opportunities and threats to the real estate sector in India. These pointers will help you understand how the real estate sector may fare after COVID-19.
Overall, experts, developers, and investors in the domain have mixed opinions about the prospects of the real estate sector in India after COVID-19. Whereas in the pre-COVID era, the realty sector was hit by policy changes, low sales, GST implementation, and other factors, during the lockdown, the entire sector came to a standstill, meaning zero operations.
Naredco has, in one of its reports, forecasted that the real estate in India is expected to incur a loss of Rs 1 lakh crore because of COVID-19. That’s a lot of money to lose. However, some experts believe that the real estate sector has a chance at bouncing back post-COVID, provided it responds well to the policies announced by the government to: contain the spread of the virus, revive the economy, and ease the burden on citizens. Let’s proceed.
Opportunities for the Indian real estate
Undoubtedly, COVID-19 couldn’t have made an appearance at a worse time in India. Nevertheless (and thankfully), even such grim situations have offered several opportunities for the realty sector.
China’s fallout with economies
Given that many economies across the world are looking to reduce their dependence on China, be it imports or manufacturing units-wise, India can offer them what they need. Skilled and affordable labour, inexpensive rentals and the likes may get global players turning to India for their business requirements. The only concern here would be that these economies may move businesses back home to bridge their employment gaps.
Falling stock markets, oil prices, and a volatile INR
Plummeting markets forced investors to sell their stock positions and park their funds in safer options such as gold. However, diving crude oil prices and a volatile Indian National Rupee (INR) have not released investor’s worries entirely. Coupled with falling property values, these factors attract investors in the commercial properties segment of Indian real estate — hoping to make decent returns — to park their funds in the real estate sector.
Besides, cash-starved developers may be forced to sell their unsold properties at discounted prices. As per PropTiger.com, there was unsold inventory worth ~Rs 6 lakh crore as of Mar 2020. Speaking of prices, Deepak Parekh, Chairman of HDFC says that the value of unsold residential properties may fall by 20%. Developments like these would attract opportunistic buyers or investors to acquire homes at lower prices and fuel the demand in the real estate sector. Continue reading other opportunities and threats to the Indian real estate sector here.
