Similar scenario is expected post Covid-19 pandemic. Realty sector, one of the largest employment generator may face huge job losses leading to overall economic slowdown or possible recession. The real estate body NAREDCO (National Association of Real Estate Development Council) has estimated that the real estate is going into the loss of Rs 1 lakh crore. It also seeks $200 billion package from the Govt to kick start the economy.
It is visualised that the overall real estate sales may come down by 25 -30% and the prices of residential units will come down to anything between 15 to 20%. Land price will come down by 30%. The impact of covid-19 will lead to delay of project completion anything up to 6 months or more.
The Real estate sector was burdened with the implementation of 2016 demonetisation followed by implementation of GST bill and RERA act successively within one year. Although it had its teething issues, it was balanced by many positive moves initiated in the last 4 years. To quote few, amendment on GST bill to accommodate the issues raised by various business organizations and associations, amendment on REITs (Real Estate Investment Trust) which are listed entities that invest on income generating real estate properties and distribute 90% of the income generated to the unit holders as dividends, affordable housing incentives, falling interest rates..etc.
With all the Incentives and initiatives offered by the government, it was expected that the real estate market would grow in the days to come and 2020 will bring favourable sale opportunities. However, the unprecedented Covid-19 led lockdown severely hampered this hope and hit the economy overall. This will lead to delay in payments by all stakeholders, face liquidity crunch and unsold units will be on the rise.
The real estate sector will face problems in labour, financials, demand and sale. Customer sentiment and mindset on new purchase at this juncture, will add more to the demand crisis. Rising unemployment with an estimated job loss of aprox. upto 30%, and delayed building approvals will have to be dealt with effectively and proactively to avoid slump in the construction sector. The cost of building materials, mainly cement, steel..etc will increase due to lock down of these manufacturing units. The disrupted supply chain will lead to additional cost on the units thus making the salability tough and the sluggish sale velocity will have an impact on cash flow issues.