by Rohit Poddar MD, Poddar Housing and Development
COVID-19 has impacted every sector in some or the other way affecting country’s economy. The sentiment across sectors is at all-time low in the Quarter 1 of the calendar year. The real estate was reeling around several issues over the course of last 3 years and the demand for luxury and semi luxury projects took a major hit due weak demand and high price.
Affordable housing was the game changer for real estate and it will take the centre stage post lockdown due to its value proposition. This pandemic has made people realize that real estate is the only real asset in such challenging times.
It is difficult to think of a business that has not been impacted by the Covid-19 pandemic. The national lockdown to curb the spread of the novel coronavirus pandemic has stalled all businesses in India, barring essential services. And activity in the real estate sector which is among the top contributors to the nation’s economic growth has been paused from past few weeks. The sector, especially the residential segment, has already been struggling with project delays, regulatory changes and low sales for the last few years. The quantum of impact will depend on how long the lockdown will last and how long the economy will take to get back on track.
Reforms undertaken
Government has rightly focused on ensuring an ecosystem to provide essential resources to migrant workers and daily wage earners, while the sector is eagerly waiting for a fiscal package for revival. Labour codes announced will enable better compliance along with a plethora of benefits for the workers. ₹ 70,000 crore boost to housing and MIG through extension of CLSS shall help in creating job opportunities leading to investment of ₹ 70,000 crore in housing. This shall also stimulate the demand for steel, cement, transport and other raw construction material. We look forward to the Affordable Rental Housing complexes for migrant workers and urban poor that shall help in addressing the housing problems for these workers.
The ₹ 20 lakh crore package announced by the govt will help in kick starting operations and asset creation. The Encouragement to MSME’s to get them listed on main board of stock exchange and the infusion of ₹ 50,000 crore equity will help them in tackling the shortage of funds. From real estate perspective, extension of 6 months of project completion and liquidity measures will help developers secure immediate working capital requirement post the lockdown. Also the government has rightly focused on ensuring an ecosystem to provide essential resources to migrant workers and daily wage earners. Labour codes announced will enable better compliance along with a plethora of benefits for the workers. ₹ 70,000 crore boost to housing and MIG through extension of CLSS shall help in creating job opportunities leading to investment of ₹ 70,000 crore in housing. This shall also stimulate the demand for steel, cement, transport and other raw construction material. We look forward to the Affordable Rental Housing complexes for migrant workers and urban poor that shall help in addressing the housing problems for these workers. Lastly, the revised minimum threshold of Insolvency and Bankruptcy Code (IBC) from ₹ 1 Lakh to ₹ 1 crore will definitely improve the ease of doing business and reduce the pressure on all the sectors at such crucial time. Overall, this announcement has focused on benefiting the businesses across the country to uplift the growth of their business and ensuring immediate liquidity required for staring economic engines, post lockdown.
Real estate post COVID
It is impossible to analyse the impact of the current situation. However, affordable housing is expected to be recovered first. While the hit on margins may not be severe, it will be felt in the coming quarters. Post the pandemic, real estate developers should focus on a mix of affordable and mid income segment housing to ensure sustained sales leading to cash flows and liquidity, as these are the categories that would bounce back first. With current economic situation one thing is certain; the lack of jobs in the market will have an impact on housing. It’ll be wise to maintain the balance between affordable and mid income segment housing inventory, as one is not sure which inventory would be the first to move. This pandemic has made people realize that real estate is the only real asset in challenging times. Post lockdown, people would invest in affordable houses as a medium of smart investment. While there is no handbook that people can follow to cope with the crisis but lockdown has changed the approach and spending pattern of many individuals. Going forward buyers would be very cautious while making a new investment.
With majority of the construction activity halted due to various reasons the labourers staying back should be offered Construction Skills training in masonry, carpentry and plumbing. With various institutes taking online classes it will not only help the developer but also the individual. These courses are spread over one to three months in time and with major cities still on lockdown seem like a feasible thing to do.
The economic revival will start with the opening up of the lockdown and a return of the working population to work as soon as possible and dealing with the new normal of living with the virus by taking adequate measures. The measures that the RBI is taking to try and boost the economy is positive, however they must insist on transmission of liquidity and the rate cuts to the borrowers from the banks and financial institutions, which is currently not happening as fast as it can be in the context of the pandemic.
Furthermore serious and effective steps are required to be taken to boost the demand side of the economy and spur consumption which we hope will happen soon.”
