The real estate sector has already been struggling with project delays, regulatory changes and low sales for the last few years. How the coronavirus will affect it, remains to be seen.
As most companies and organizations have proceeded to implement policies of zero contact meetings and no visitors, the real estate market is gazing at the future with uncertainty, however, accompanied by optimism. It is difficult to think of a business that has not been impacted by the covid-19 pandemic, but for the Indian real estate sector, the impact of the crisis cannot be gauged precisely at this point. It has been a known fact that the sector, especially the residential segment, has already been struggling with project delays, regulatory changes and low sales for the last few years. How the coronavirus will affect it, is a new question on the horizon.
No one can predict where the market is headed to. There is a belief that the residential market would bleed more as the problem of labour, delays, finance and sale will only get worst. The belief is that people will lose jobs and would not like to take a long term loan where they are not confident about the future. The developers may not be able to sustain the present debts and would go bankrupt if the government does not come out with a relief sooner than later. Even labour would not come back to cities as they will feel safer in their villages, which might end up increasing the cost. With labour unavailability, the costs of building homes would go up due to increase in cost of labour and the supply constraints will result in an increase in the cost of materials.
The other belief is people have realized during these tough times that home is the only safe environment we have. With work from home increasing, the people need to make sure they have a good home and the right spaces. People will be looking at owning homes rather than renting as that is the safety net we all need. And with the stock market not doing well and difficulty in predicting the future of companies, people will put their money to safe investments like real estate.
We are living in a world where predicting the future is like tossing a coin. So how do we make a decision? According to me, the best way to see the future is to look at what has happened in China after the lockdown got over. It’s interesting to see that in China the retail stores started slow but are back and saw some revenge buying. Office markets have stayed stable with lots of measures to make sure they are safe. Residential has been the most buoyant market with purchase of homes by both end users and investors. Homes which are bigger and more convenient for work from home options are taking better traction.
Whether India would follow the same route or not is not clear at the moment. However, we could hope for the best for the real estate segment in the country.
(By Ankur Gupta, Joint Managing Director, Ashiana Housing Ltd)