2020 will undoubtedly be known as the year of the COVID-19 pandemic. What started as a minor inconvenience in the fag end of 2019 has mushroomed into a global crisis on an unprecedented scale. During such trying times, when even essentials are scarce, the dream of an own house seems like a far cry. Right now, the question on everyone’s mind is, how will the world come out of this? How have industries changed their approach to absorb the impact of the Coronavirus blow?
The real estate sector hasn’t been spared either, especially concerning India. With the economy taking a hit, investment in real estate has been put on the backburner, with the focus shifting to more essential services and sectors. However, it isn’t as simple as that. Real estate in the time of COVID-19 is actually in a very peculiar state, with predictions going either way on the state following the aftermath of the pandemic. First, let’s take stock of the situation at hand.
The Indian real estate sector stepped into the new decade with promise and ample scope for growth, at least from the homebuyer’s perspective. Lower interest rates on loans and slightly lenient tax exemptions provided a ray of hope to prospective home hunters.
From the builder and developer end of things, it is a tale preparing the launchpad but never lifting off. Most developers across the nation had a stock of projects waiting to be sold to meet the increase in demand for quality homes. As is the norm, these new projects were expected to be launched during March 2020. Ironically, March 2020 was the same time the Coronavirus infection rate started booming worldwide, crippling nations the world over. This placed a hurdle to developers by not letting them conduct site visits with prospective buyers.
Consequently, homebuyers were more sceptical about investing in properties upfront due to the uncertainty of the times. The sinking economy only fueled their apprehensions. Since then, the real estate industry in the country has rallied to cushion the COVID impact, but things remain in a state of limbo, waiting for normalcy.
So what measures has the real estate sector in India employed to alleviate the situation? In a broader sense, it has been all about a team effort, going beyond just the real estate sector itself. Whether you’re looking at flats for sale in Porur or elsewhere, it’s essential to know the implications of the current scenario on your prospects as a homebuyer. For the sake of simplicity, let’s go over each repercussion of COVID-19 on real estate one by one.
- Builder profit slump. As mentioned before, builders are facing a huge issue in selling off their projects during these trying times. Some builders are also being faced with the option of liquidity to cut their losses, and are looking for some leeway from banks and investors alike.
- Commercial establishment crisis. COVID-19 has forced one and all to stay at home, imposing the biggest public quarantine in history. The establishments worst hit by this curfew have been office spaces and malls. With work-from-home becoming the global norm, mall owners are looking for alternative options to invest in, as store spaces are deserted, and office spaces are currently not in use.
- Impact on societal living. In populous countries, space is a genuine constraint, which prompts the option of co-existence. The COVID-19 pandemic has brought the concept of social distancing to the world, and people are taking active steps to live and work under their roof, away from others. This has also influenced the development of gated communities to an extent.
- House-hunter perspective. From the homeowner’s end, things look bleak, with investors in the sector looking for more secure options to reassure them of ROI on their investment. The way they scrutinize projects has become way more stringent as they make calculated ROI decisions before banking on a project.
These points offer a broad-strokes perspective on the repercussions being faced by the real estate industry during the COVID-19 pandemic. The benefits of buying a flat in Chennai, for instance, don’t matter that much when essential services themselves are on hold. So what measures has the sector explored to circumvent these issues?
Recently, the Government of India announced several measures that seek to offer some reprieve for Indian real estate. Let’s go over the policies one by one.
– Force majeure factor. The Government has declared the pandemic an “Act of God”, which directly entails that project developers will not be penalized for failing to deliver on the promised dates. The government has also offered provisions to extend delivery dates and completion targets by up to six months. This provision will be supervised by RERA depending on the stipulated parameters.
– Loan relaxations. From the homebuyer’s perspective, there is a promise for relaxation in terms of loan clauses and EMI provisions offered by their respective banks. This ties back to the declaration of COVID-19 as force majeure, which would create provisions for easier loan availing and repayment clauses. During the pandemic, the RBI had also announced a moratorium on all repayments for three months.
– Liquidity provisions. To further lessen the impact of COVID-19 on prospective real estate investors, the government has also announced the option of liquidity for third-party housing finance companies and other funding institutions. This has been implemented in a ₹30,000 crore pool, with an additional ₹45,000 crore fund under a system of partial guarantee. What this means is that financing houses now have a sizable credit pool to serve their customers and bring people closer to investment in real estate.
Aside from this, the Government of India has also announced special measures for migrants to avail housing, as well as the extension of the Credit-Linked Subsidy Scheme (CLSS) for an extra year.
So if you were looking to invest in an ideal 2BHK flat for sale in Chennai, there have been better times to do so. Don’t lose hope, however, as the nation is working to fight the real estate slump and bounce back twice as energetically!