Effect of Pandemic on Real Estate
Effects of Pandemic on Real Estate
The coronavirus pandemic has little question about changing the working within the world economy. Right from aviation and tourism to retail and land, all industries are impacted in various ways. The main sectors affected in India are MSMEs, tourism and hospitality, aviation, automobile, and land. Before the pandemic situation, the important estate industry was adjusting to varied structural changes and other reforms introduced by the govt. Combined with the COVID-19 pandemic, it's been impacted further. it had been projected that the contribution of the important estate industry is about to rise to 13% of the GDP by the year 2025. However, within the current scenario, any projection of growth within the contribution to the GDP won't hold true anymore.
Impact on real estate
Small and enormous, the industry has witnessed a slowdown in the progress of projects under construction and delays in buyer decisions to get properties. A couple of the challenges faced by the industry are the migration of workers, credit crunch, and disruptions within the supply chain for building materials. A survey by Knight Frank India has shown that 42% of the respondents feel that subsequent 6 months will see no new supply being added to office estate which the rise in rental housing value is additionally not expected any time soon.
In terms of demand for commercial land, businesses are postponing leasing decisions due to the ‘work from home’ norm that has become prevalent now and should continue for the subsequent few months. Retail land has also seen a fall due to the decrease in global demand from consumers and hence, an interruption on expansion activities by brands. In light of those circumstances, the govt has announced a high tax benefit and found a relief fund to the tune of 25000 crores for projects that are on pause and lower interest rates on home loans to incentivize people to form purchases.
How buyers & developers get affected.
Potential buyers who were considering initiating the buying process or were within the midst of it are postponing their purchases until after the lockdown due to the stoppage of site visits and therefore the uncertainty around job security. This is often despite the fact that the government has taken measures to enhance purchases like lower home equity credit rates and a greater tax rebate. The sentiment within the market is sort of low currently and is probably going to enhance only within the medium to future. so as to continue property search safely during this period, buyers can start shortlisting them online on land portals, make use of the Augmented Reality (AR) and computer game (VR) tours of properties offered by builders and use the portal for RERA in their state to see the state of clearances. A survey by 99acres has also revealed that around 60% of buyers would like to undertake virtual tours to finalize their purchase and 60% of them were getting to purchase homes within a year.
With the difficulty of unsold stock and delays in procuring the building materials for projects, the development process and sales together have come to a halt, affecting the revenue of the industry. Considering that the industry was already reeling from the impact of the structural reforms and credit crunch, the lockdown thanks to the pandemic put the market at an extra disadvantage. Firstly, many land developers are already taking precautions while showcasing their flats like temperature screening and checking travel history. Additionally, virtual interactive tours of projects are introduced to offer prospective buyers an experiential feel of the location. It's important for developers to stay updated with the latest developments in projects, suit RERA, and answer public queries online to make sure transparency.
The next few months, unfortunately, look bleak for the industry due to the demand slump, poor market sentiment, and disruptions within the supply chain. Though the government has introduced relief measures that are bound to be beneficial unless the market sentiment picks up and therefore the pandemic subsides, it's just like the situation isn't getting to change an excessive amount of. Hopefully, the industry should be ready to find ways to seem beyond the pandemic and decide to recover accordingly.