We are undoubtedly entering an era of profound change in how we work, learn, live and socialise with COVID-19. Developments are incredibly fluid, and tremendous uncertainty remains and will impact public health, economic growth, and real estate markets.
The coronavirus pandemic will, however, do more than changing the way we might feel about at our home. Though it has a significant impact on property markets around and is developing a bit of momentum, with interest cuts the last yeat and easing in credit conditions. Coronavirus has undoubtedly changed the story of 2020.
Amidst countries applying extreme measures to contain the spread of Coronavirus outbreak, businesses have come to a grinding halt across the world. COVID-19 is forcing monetary agencies to slash growth forecasts for the global economy with India included. The projections by International Monetary Fund (IMF) says India seems to head towards a historic contraction of 4.5% in FY21 as severe fallout.
In India, the economic growth is already set to slow down to a record 11-year-low, a prolonged lockdown. The real extent of the damage is hard to grasp in a scenario where every day is making a significant difference.
COVID-19 Impact on Indian Housing Market:
The COVID-19 spread has further delayed a recovery that might have seemed possible because of numerous government launched measures to revive the demand. According to Niranjan Hiranandani, national president, NAREDCO, “Salvaging Indian realty, the second-largest employment generator is critical, not only from GDP growth perspective but also for employment generation, since the sector has a multiplier effect on 250-plus allied industries.”
The demand slowdown in the residential segment has already curtailed housing sales, project launches and price growth in India’s residential realty sector. It has also been reeling under the pressure caused by mega regulatory changes caused by Real Estate Regulatory Authority (RERA), Goods Services Tax (GST), demonetisation and Benami property law. The probable impacts of COVID-19 are:
- Homebuyers are likely to postpone their property purchase decisions as they wait for clarity on job security.
- Delays in the supply of construction materials and shortage of labour can push the delivery timelines of ongoing projects.
- The pandemic has resulted in the closure of malls, retail outlets and entertainment venues putting the future of commercial real estate deals on hold.
- Companies worldwide have announced remote working for employees, to contain the spread of COVID-19.
COVID-19 Impact on Home Buyers in India:
If low-interest rates and high tax exemption are making a change in consumer behaviour, it is then likely to shift the halt near medium term. The rebate against home loan interest payment is as high as Rs 3.50 lakhs per annum. The crisis has retracted the end-user confidence to its lowest level ever pushing any real estate purchase decisions to the distant future. The current lockdown has brought the real estate industry to a standstill position, and the recovery curve will depend on the fiscal stimulus rolled out by the government.
In a survey conducted by Housing.com in collaboration with NARECCO, 53% respondents said that they have put their plans to buy a property on hold only for six months and plan to return to the market after that. Nearly 33% of respondents in the survey said that they would upgrade their homes, to fulfil work from home. In renter’s survey, 47% of respondents have said that they would like to invest in property if they are rightly priced.
COVID-19 Impact on Builders in India:
Various developers were sitting on an unsold stock worth approximately Rs 6 lakh crores, as of March 2020. The near-halt on construction activity amid a lockdown in India to contain the virus and delay in supply of manufacturing materials from China. As the situation is seen worsening in India, builders here will be hereon forced to postpone orders.
There are several measures announced by the government in its Coronavirus-specific stimulus package and the EMI holiday for developers during the crucial period might offer some relief to the builder communities.
Let’s Hope for Rebound:
2020 will, in many ways, be a difficult year for the economy of any country. The talk of recession is growing, and while the big companies may not lay off a lot of people, a lot of businesses are facing the prospect of low to no revenue. There is no other choice.
RBA has talked about a rebound in the second half of this year, and hopefully, they are right, but it can even be 2021. Either way, it’s really important to remember the rebound will happen soon. People will recover, and things will go back to normal eventually – but there will be some business casualties along the way.