The global coronavirus pandemic, needless to say, is adversely affecting all businesses and cash flows. This unforeseen crisis is intimidating all of us irrespective of our financial standing. The uncertainty is enormously impacting our lives and is threatening to transform our ways and thinking.
The Real Estate Industry in particular has been reeling in problems like liquidity, low sales, regulatory issues, etc for quiet sometime. This pandemic is going to further dent the Realty sectors prospects going forward throwing at it, new sets of challenges to deal with.
It is too early to ascertain the impact on the sector, it will all depend on how long the lockdown would be in force and thereafter how long the economy would take to come back on track.
These are the possible consequences that come to mind.
# Delay in completion of under construction projects.
Homebuyers who have booked an under-construction property could have to wait a little longer to get possession as project deliveries will get deferred. With the nationwide lockdown currently on, construction in projects is at complete standstill all over the country. The duration of delay will not depend on the length of the lockdown alone. Post the lockdown, the developers will take time to restart full-fledged operations given the labour constraints. As most of the labourers who are from other states might have left for their home towns and may not be able to return immediately with restrictions on movement and the fear of the pandemic.
# Dip in sales and deferred launch of new projects.
Most people will postpone decisions to purchase Real Estate in this uncertain atmosphere. As a result, real estate sales will see a sharp decline in the short term. On the supply front, with the uncertain business environment, new project launches will be put on hold by developers. Having missed out on auspicious festivals to announce their new project launches, developers will be forced to defer their plans even further.
# Impact on price.
Prices in Goa have largely seen less volatility during tough times in comparison to the rest of the country. Past few years have been especially difficult for the real estate sector and the prices have already seen discounting wherever possible. Therefore, considering the fact that Goa is a much sought-after destination for property shopping, the prices are expected to remain stagnant in the short term. Again, there may be exceptions. The impact on pricing will also depend on the financial strength of the developers, as some who might be facing a cash crunch may offer to sweeten the deal in terms of discounts or easy payment options.
# Commercial Real Estate Leasing to be impacted.
The commercial retail space has been trying to come to terms with high rental costs in certain exclusive markets. With prevailing liquidity crunch, weak affordability and subdued demand conditions, it is expected to witness some moderation owing to the ongoing mayhem caused by the virus for a while.
However, the repercussions on office spaces are likely to be marginal in terms of pricing. In Goa, due to the shut down on the mining industry, the scenario has been challenging for quite some time now. Any possible discounting has already been factored into the pricing. Further reduction in pricing may not occur. The demand for office space will however remain weak until an economic bounce back.
# Role of policy makers and stake holders.
As an Industry that values the relationship with its customers and its business associates, it will be of utmost priority to understand the need to support each other in this crisis.
The builders/developers may get impacted to some extent over collections receivable from already booked sales. Given that construction milestone-based payments may get deferred and some customers may delay payments due to economic constraints arising on account of this crisis.
Keeping this in mind, the Real Estate Industry must deal with utmost empathy and understanding. This is the time to build-up the trust and to earn the goodwill of esteemed clients.
The Government here must play a pivotal role in helping the already stressed Real Estate Sector to overcome the difficulties that the Industry is currently facing and will face in the aftermath of this pandemic. Measures like the recent lowering of interest rates and the three-month moratorium announced by the RBI on term loan instalments provides some comfort on overall developer cash flows. There needs a lot more to be done to protect the industry from this imminent disruption.
The RERA also provides for extension for completion of projects to help and support Builders/Developers to tide over crisis which are beyond promoters control. Thus, reducing regulatory risks on the developers.
# Looking forward.
Global businesses are expected to see a surge once the pandemic ends. The economy is likely to witness a slowdown in the next six months and thereafter begin its path to recovery.
The good news is, Real Estate is emerging as the most stable and safer investment option in the aftermath of the recent turmoil witnessed in the financial markets globally. This has raised hopes that investors would look at real estate henceforth as a safer and more stable asset class.
For those who were planning to buy a house or any property, commercial or residential before this pandemic, it’s time to revisit your budget. Check your finances and relook at options available.
As we find comfort in the words of Albert Einstein. “In the middle of every difficulty lies opportunity”.
Who knows, the crisis may just throw up a lucrative Real Estate investment opportunity.
2 comments
ashwin unadkat
Very well written 👌
Charmaine Godinho
Very well written Denzil.
Yes I too believe that after this time of crisis, the Real Estate sector is the one business which will prove to be secure and stable. We, as realtors need to give our clients the confidence to make their investments in our sector and work towards ensuring their satisfaction. It is our opportunity to work hard and shine. We need to be well equipped with the data required to take on the big property investment surge that is going to come our way. Good luck to us all !