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Covid Impact: Evolution of Indian real estate sector in the new normal

Covid Impact: Evolution of Indian real estate sector in the new normal

by Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure


While natural calamities and most environmental issues have a physical impact and are confined to a specific geography, the Covid-19 is invisible, airborne and has brought the world to a standstill. A global enemy with unprecedented power, the economic impact of Covid-19 is as high as its psychological disruption. Similar to the safety & security drives being altered globally to prevent terrorist strikes; Covid-19 will potentially change the dynamics of social engagements in both our personal and professional lives.

Real estate, which forms the backbone of several other industries, owing to all construction coming to a grinding halt, is severely impacted. All stake holders’ developers, investors, lenders, intermediaries, buyers and the Government are impacted. Some may argue that the entire food chain is disturbed. Key take away are further addition to stalled projects resulting in slower or new supply and new launches but at the same time slower movement of completed inventory. In terms of time, the prospects of residential sales and commercial leasing in the first half are at an all-time low. The recovery in H2 perhaps is a possibility, provided Covid-19 spread is arrested and there is a vaccination prospect.

The other side of the coin


The upside of the downside is opportunities for buyers at attractive prices and well-funded developers facing less competition can potentially scale upward. Similar to the volatility in the stock market being seized by many as an opportunity to enter at lower valuations, Tier 1 Developers and Investors having demonstrated capability, track record, access to capital can acquire brown field and green field projects at valuations never seen before.

The majority are focused in cash flow management but the few who potentially may benefit with less competition, faster deliveries, better traction with sales resulting in accelerated growth of the developers. Corporate Developers or corporatization of the real estate business is the new mantra. Liquidity challenges have been discussed many times. However, it is trust deficit and lenders are reluctant but keen to lend to Corporate Developers. This places the corporate developers at a strategic advantage. Aided by the regulation framework, Developers who demonstrate customer centricity and empathy would set new benchmarks and bring in positive much needed change in the perception of the sector.


Just like the developers, users/buyers who are capitalizing on this situation are investing in residential property. Part of this is because of the RBI slashing the repo rate by 75 basis points to 4.4%, resulting in home loans coming down to 7.5%. Coupled with factors like attractive offers from the developers, No GST for Ready to move in inventory, immediate rental saving or income, residential real estate seem like an attractive proposition. It is likely that a significant number of people will consider investing in property as that is a more stable, long-term asset against the rationale of renting or low yields. The recent losses in stock markets have shaken the confidence as well and some sectors may take time to recover. Additionally, NRI’s interest has also risen in recent times as they come back to India and look for residential properties.

Ready for ‘The Ready to Move in?’

Amidst these uncertainties, the buyers are now keen to buy from reputed developers with ready projects. With social distancing becoming the norm, digital infrastructure is likely to enable sales considerably. No development risk, a sense of security of owning a home in uncertain times, low interest rates, attractive prices, no GST, interest subvention in affordable segment, attractive payment plans from the developers are being seized by many as an opportunity. It is such a huge opportunity that even the private equity is keen to consider bulk buying and unlocking value next two years vis-à-vis a green field and brown field, which would take 5 to 6 years.

As most businesses transform themselves, real estate companies, too, are evolving and adapting to what is being called ‘the new normal’. Company policies and business decisions will now have to factor in the upgrades require for employees working-from-home, change in consumer behavior and digitalization of company processes, amongst others.

Social Responsibility

It will be important for businesses to keep up employee morale as well as productivity while they work-from-home. Virtual Town Halls, setting up of telephonic and e-counselling for not just employees but also their family members, several self-help resources, online workshops and assessments are some ways to enhance the learning and development of employees working from home.

It is commendable how most developers and contractors have done an excellent job of taking care of construction workers. But it was not enough as the construction workers who chose to migrate back did encounter difficulties. In times like these, humanity should prevail over business. Businesses must show solidarity by not terminating or reducing the wages of their employees, casual or contractual workers as this an incredibly difficult time for everyone. From a long-term perspective as well, it is beneficial for everyone to ensure the safety and well-being of both skilled and labour employees.

The State of State Government’s

Until now, the Central Government has taken several measures to promote affordable housing and RBI has done its bit to provide for liquidity in the banking system. The Banks, Mutual Funds & NBFC’s now must help move capital and not ration it or take advantage and make the capital expensive, which has been happening.

It is time for the State Governments to objectively aid the revival of the real estate sector. They must consider reduction of stamp duty, ready reckoner rate, FSI premiums or TOD/TDR and not delay permissions. Digitization is the need of the hour for State Governments to move the entire process online. Considering that crores of loans and properties can be sold online, it should definitely not be difficult to make the payment for mere ₹ 30,000 for registration through online medium.


Outlook is likely be a new environment. Like always, the market sentiments may change faster but the balance sheets will take time to show promise. The natural process of disruption or consolidation would bring in opportunities in plenty. Only the real estate development companies demonstrating Agility, Discipline in Business, Decisiveness, Digitization & Responsiveness to Customers, shall reach new heights and make the sector lot more resilient, credible, customer & environment centric. Beyond real estate, all businesses must become socially responsible towards planet and people for a symbiotic growth in the post-Covid era.

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