By Rohit Poddar, Managing Director, Poddar Housing and Development ltd
The impact of the novel Coronavirus on Indian real estate has been unprecedented to an extent that it has brought construction activities to a halt and significantly eroded the market of its potential buyer-base. The first six months of 2020 saw Indian real estate falter on multiple fronts — home sales, launches, office transactions and completions. According to Knight Frank India’s half yearly report for 2020 reported that residential sales across eight top property markets fell by 54 percent in H1 FY20, as just 59,538 homes were sold between January and June. That number was 129,285 in H1 FY19. While the residential market has been sluggish in the last couple of years due to back to back policy changes followed by demonetization and the implementation of the Real Estate (Regulation and Development) Act, 2016. While luxury projects have taken major hit, affordable properties have paved way to keep the sector operational.
Since 2014, affordable housing segment has witnessed a strong market base due to the value proposition that is backed by Prime Minister Modi’s promise of housing for all by 2022. Property transaction may have dipped due to job-losses and sector is going through challenging times with labor shortage, unsold inventory and lack of liquidity in the system. The real challenge here is to keep the business operational till the pandemic passes and there are several ways to do that.
Contingency Plan and Timely Execution
The pandemic has made everyone realize the value of time and timely execution of things that are essential. Developers today need to ensure that work undertaken under these challenging times should be executed and complete within the given timeframe as no one knows what tomorrow will bring. The sector needs to prepare itself for times to come, for example; during lockdown the first and foremost demand was to allow construction as rainy season was to arrive soon and the preventive measures for rainy season were not even initiated. Hence to avoid such conditions again, sectors need to prepare itself for better tomorrow.
Optimizing spends:
The suo motto of anyone during these times is Save More, Spend less and Invest Smartly. The sector should also action this motto to ensure optimum liquidity for worse times. Developers should invest after a thorough analysis of ROI and only invest in things which are most necessary for the project or sales. Its time for developers to conserve the capital to stay afloat.
Although there are several challenges that the sector is facing currently, but it has also provided the opportunity to build bonds with consumer using digital mediums. In last few months real estate has progressed digitally as the overall consumer behavior has changed significantly and people now prefer actioning things online. Technology adoption can prove to be beneficial for revival of the sector. The pandemic has forced the government to look at alternatives for minimizing the risk posed to the economy and technology rose to tackle this challenge. PropTech, digital construction, precast technology, 3D printing, prefabricated technology are all innovations that can be leveraged to derive growth and prosperity for the sector in the ‘new normal’. The government has launched the initiative ‘Digital India’ but this needs to work in tandem with policies designed to facilitate technology exchange. Developers who promote the use of technology should also be given attractive subsidies or tax exemptions. The facility to register sale agreements of properties by Maharashtra government will also help developers to help in uplift the fall in Real Estate.
Lack of liquidity is a huge challenge for developers. Lowering of income tax can act as a boost to the sector as it will lead to reduction of financial burden on the buyers and increase their disposable income. The government can also look at a one-time roll over of credit limit along with 50 per cent reduction in GST rates to bolster developers. The liquidity crunch being faced by the sector can be alleviated by the release of tax refunds, pending with the government. The abolition of stamp duty or its incorporation under GST will also aid the sector towards this end.
The involvement of institutional players will help in evolving business models to be more structured and gain further momentum in real estate sector. Affordability will still remain the key parameter and the support from government will help in the revival. The completion of existing projects and handover to the existing buyers shall be the catalyst in restoring the confidence in the housing sector.
This pandemic has put a mindset on people to use e-service for everything, whether it is buying a grocery, paying bills or using any other services. One should understand the fact that at the time of the pandemic, it’s the home that is keeping them safe. Having said that, people have also realized that a house is keeping them safe more than ever. Eversince the moratorium announcement, people who have secured income/savings are looking at investing it smartly to build asset that would help them in such challenging times. Owning a house has always been a dream for everyone in India and with this pandemic the rates have fallen to their lowest which makes it the right time to invest.
