COVID-19 Impact on Real Estate in IndiaAddressofchoice 10 July 2020
From wearing masks and saying no to public gatherings, we have come a long way in our fight against COVID-19 but finding a ray of hope still seems to be a distant thought. With newspapers and news channels coming up with the latest developments every single hour, our fears are increasing manifold. The mayhem caused by the pandemic across the global economy is not a hidden secret. From the hospitality industry to manufacturing to real estate, the tremors of the slowdown can be felt and reviving from this will take a good amount of time.
Real Estate and COVID-19 in India
The real estate industry in India has been adversely affected owing to the lockdown which began in March. Though the government has released relaxations across the country in a phased manner, the view of the construction sites is no longer the same. The reasons for the same are:
The labourers having travelled back home because of the uncertainty in the environment the dearth of the workforce at the construction sites has crippled the entire process.
The cost of material like iron and steel products, plastic and fibre elements, technical construction equipment, solar panels etc is going to touch the sky because the international fights have not been resumed and traders don’t have access to the international market for procurement of raw material. This will ultimately lead to an increase in financial distress.
India is heavily dependent on China for its steel requirements and the situation getting grave amidst the pandemic and the border issues with China, the real estate in India is going to face the brunt.
The buyer sentiment is no longer positive because of highly turmoil marker scenario.
The thrust area of the government now has shifted from constriction to allocating sources for fighting against the virus. In such circumstances, the real estate projects of the government are bound to take a backseat.
The deadline for the completion of the projects has been increased for an indefinite period and this has led to softening of the rentals.
What is the government relief package for the real estate sector in India?
Following are some of the measures of the Government to give a buffer to the real estate sector:
The threshold limit for initiating the default proceedings under IBC 2016 (Insolvency and Bankruptcy Code) has been increased to Rs once crore from Rs one lakh.
EMIs have been deferred for the home buyers.
Rs 31000 crore fund has been set up for the welfare of construction workers and the states have been directed to sue this fund judiciously.
The State Governments of various states like Delhi, Maharashtra, Uttar Pradesh etc are compensating the workers for the loss of their jobs.
The Central Government is asking the State Governments to invoke Force Majeure clause of RERA. Under this clause, the completion deadline of the projects can be extended by six months.
While calculating NPAs, three month moratorium period on varied kinds of loans will not be accounted for.
The basic definition of MSME (Micro Small and Medium Enterprises) has changed. This will help in boosting demand creation.
Package of Rs 1.71 lakh crores has been rolled out by the government which will help the migrant construction labourers.
Reduction in CRR, Repo Rate and Reverse Repo Rate will help in lowering the cost of borrowing the funds and shall infuse in liquidity which will help in speeding the projects.
The compliance burden has been eased by delaying the deadlines for filling ITR, Aadhar-PAN linkage and composition scheme.
NABARD (National Bank for Agricultural and Rural Development), SIDBI (Small Industries Development Bank of India) and NHB (National Housing Bank) have been funded with Rs 50000 crores from the Government to increase the momentum in the real estate sector. This is a part of Rs 1 lakh crores set by the Govt through the direct lending facility. Another 50000 crores will be infused through Long Term Repo Operation (LTRO).
If you happen to visit the construction sites today use of masks and sanitizers has increased tremendously and this trend is nowhere to go in the near future. With the government providing a huge buffer for the sector, the navigation through the challenging times will be eased.
Though the property visits by the buyers have decreased, the hope for hay days cannot be lost. The situation is unlikely to see a landslide shift in future but as they say, there is always a silver lining in the dark sky so this is the time for the indigenous industries to exploit their potential and reduce the dependence on imports.
The impact is severe but working collectively will help in sailing through the tough times!