Impact of Covid – 19 in Real Estate Industry

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The year 2020 has taught us many things due to the onset of the covid-19 pandemic all over the world. Our life has adopted a lot of changes and people all over the world are adjusting to the new normal that is set due to the arrival of the coronavirus.

Real estate services are very important for every country. Real estate Industry plays an integral role in the economy of every country. Residential real estate provides housing for families. For many civilians of the country, the greatest source of wealth and savings is real estate services and jobs. all the apartments and buildings are included in the commercial real estate which includes creating jobs and spaces for the real estate, offices and manufacturing. a source of revenue of millions can be provided because of real estate business and investments.

The second-largest sector after agriculture is the real estate sector. The experts state that the real estate sector is positioned to grow around 20 per cent over the next decade. There are four sub-sectors that together comprise the real estate sector; these include housing, retail, hospitality and commercial. it has been observed in the previous decades that the high growth of the real estate sector is marked by the growth of the corporate environment as there is a high demand for urban and semi-urban accommodation as well as office space.

The real estate sector has the most contribution in setting up the construction industry in India which ranks third among the 14 primary sectors if we look at it in direct terms as well as indirect terms and induced economic effects in the economy. It has been expected that the real estate sector will further in the near future, definitely helping to incur non-resident Indian (NRI) investments. Because of these opportunities, the results could be incurred in both the short term and the long term. it has also been seen in Bangalore that the most favoured property investment destination for NRIs and Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun is followed by it. 

Whether you plan to buy a property or looking for a house on rent real estate market plays a major role in all your plans. From the last 10 – 15 years the Economy of India has experienced excellent growth that ushered in an age of liberalization and offered for better contribution from the private sector. Bringing in the market for investment was helpful in encouraging mixed primary development across different sectors, in that way leading to accelerated consumption and sharp investment movement in the economy.

This development has also led to the transfer of the real estate sector as well which has been established as a medium for the development of large scale in the secondary industries in the nations. Real Estate is an important part of the economy and is accountable for an extensive part of its development investment, advancement of the nation’s infrastructure stand & major originators of trade and industry activity.

Real Estate Industry in Covid-19

strategies for real estate service

Covid-19 has shown a significant effect on the real estate sector. economic activity has been largely impacted due to the outbreak of the covid-19 pandemic as a result some important sectors have to suffer major losses due to the prevailing situations. The real estate sector has also been considered to be immensely effective. But for the sector which has been recently recovered from the first wave of the covid-19 pandemic in 2020. The second wave has been established as a massive shock. there has been observed a sharp dip in the property sales and the new project launches and the commercial rentals from the last month due to the semi-lockdown has again been stopped.

Amid a dramatic spike in the number of new coronavirus cases in India— it reported a record 115,736 new COVID-19 cases on April 7, 201, showing a 13-fold increase in two months—demand for residential real estate in India might be thrown off track, says head of industry body CREDAI.

According to health ministry data, India has recorded 12.8 million cases, the most after the United States and Brazil. The surge in cases has resulted in a large part of India, especially in Delhi, Maharashtra, Rajasthan, Odisha and Gujarat, now being under restrictions which include part-lockdown, weekend lockdown, night curfews, etc.

“We are worried about the second wave of the Covid-19 pandemic. If logistics and supply chain support are available and migrant labour is on-site, I don’t think there will be a problem. In case of a complete lockdown or loss, the (buyer) sentiment may get impacted… The Covid-19 may turn out to be a short-term dampener,” said CREDAI national president Harsh Vardhan Patodia at a virtual press conference.

The demand for housing in India might also impact amid a change instance in the banking system.

Even though India’s apex bank on April 7, 2021, decided to maintain a status quo on policy rates on April 7, 2021, public lender SBI has increased its home loan interest rates by 25 basis points starting April, in an indication that banks’ might move away from the existing historical record low-interest rate regime.

Developers are of the view that the Reserve Bank of India could have done better by effectuating some reduction in its recently announced monetary policy review.

“While it is understandable that the repo rate (at which RBI lends money to banks in India) remains unchanged, the need for special steps cannot be overlooked. Although the government has taken some steps to support the sector in recent months, such as implementing stress funds and announcing stimulus packages, further reforms are needed to help the sector expand. It would be difficult to sustain the demand in real estate without adequate government support to the developers,” said CREDAI national (north) vice-president Manoj Gaur.

What does the survey indicate?

Most of the surveys and studies which have been conducted recently indicate that as the effects of COVID-19 are felt around the world, real estate companies are being impacted in many different ways, depending on the region and asset class. In the near term, executives are concerned with preserving value and liquidity, keeping tenants may be faced with liquidity pressures that result in deferring or ceasing contractual lease payments. Certain substances, such as hospitality, retail and developers will face more immediate impacts while other subsectors, such as multifamily and non-traditional owners will likely to feel less.

Real estate services such as buying a property or any other property are majorly affected. Amid the RBI continuing to keep the repo rate unchanged at 4%, homebuyers can currently get home loans for as low as 6.65% annual interest. In contrast to all this, the average home loan is at the interest rate of 8 % seen latest as of January 2020. Price growth is considered as one of the segments that has also been under pressure in the past one year due to this impact it is on-demand.  

In a report titled ‘India Real Estate Outlook – A new growth cycle’, property brokerage firm JLL India has also indicated that new housing supply in 2021 would continue to be in the affordable and mid-segment, with developers attempting to reap the benefits of strong pent-up demand. With most rating agencies making an upward revision in India’s growth forecast, the recovery in the country’s housing sector may also be better and earlier than expected. 

On March 24, 2021, Fitch Ratings revised India’s growth estimate for fiscal 2021-22 to 12.8%, from its previous estimate of 11%, saying that ‘a stronger carryover effect, a looser fiscal stance and better virus containment’ have led to the upgrade in growth projection. 

Many other rating agencies and global think-tanks, including Moody’s Analytics and the Organisation for Economic Co-operation and Development (OECD), have also made upwards revisions in India’s growth forecasts, amid the domestic inoculation programme against the virus picking up pace. 

With the economy picking up and employment witnessing stability, the existing momentum in housing sales could sustain in the year 2021, the brokerage firm opined.

What could be the long-term effects?

Before the covid-19 era started the real estate services including the real estate base had very strong fundamentals such as leasing activity, amount of availability, string leverage ratio and capital. Looking ahead, real estate executives are trying to understand how quickly recovery will occur and what to do with the available capital and potential opportunities. 

Owners and occupiers face various effects: proprietors with long-term rentals may also sense much less near-time period impact, relying on tenant liquidity capacity, whilst occupiers might be targeted on liquidity desires and running correctly with a far-flung and/or decreased workforce. Near-time period effects can be offset through tax alleviation or different governmental incentives.

Not all actual property is appearing in an identical manner for the duration of the crisis. The marketplace appears to have pivoted totally on the inherent diploma of bodily proximity amongst an asset class’s users—even extra so than on its hire length. Assets that have more human density appear to be the toughest hit: healthcare facilities, nearby malls, lodging, and scholar housing have offered off considerably. By contrast, self-garage facilities, commercial facilities, and factories have faceless-sizable declines. 

one of the estimates taken as of April 3, the unlevered enterprise value of the real estate has fallen by about 25 per cent and more in most sectors and along with this as much as 37 percent for lodging is the most extreme example.  It’s no surprise that—when shoppers avoid crowds, universities send students home, and retailers, restaurants, and hotels close their doors—owning and operating those properties is a less valuable proposition. it can be paramount that the liquidity and balance-sheet resilience.

5 strategies for real estate service to incorporate in the new normal of covid-19.

  1. Robust construction management.

one of the major challenges nowadays is to manage the construction progress as there are limited human resources and uncertainty in the fund and material supply. Developers can focus on reducing waste and utilizing the most from the available resources. allocation of work among the workers is also very essential as with the limited workers it becomes very difficult for the real estate developers to accurately fulfil their need and work task as the wrong allocation can lead to delay and reworks. The real estate service providers can involve buyers in this process if required as their inputs can be taken at regular intervals to avoid reworks at the finishing stage. 

2. Virtual tools.

Governments are enforcing shutdowns and travel restrictions regularly. As we all know that the virus is still persisting and we do not know how many waves we have to face and it has also been predicted that the virus cases might increase in winter. because of such conditions, people do not want to take any risk and are again avoiding going on on the construction sites. So using virtual tools and incorporating them into your real estate services can be very beneficial.

Using virtual tools, real estate services can manage their sharp decrease in site visits and can also increase their convert sales. a virtual tour including giving the complete site tour can be a much better option to adopt in this time of pandemic in order to generate higher results in the buyer’s mind they do not even have to leave their home. This way the developer can eliminate frequent site visits for the potential customers and can show its property to the customer’s family and peers too. Also, the developer can reach potential customers residing at any location around the world with its offering. This could prove to be a very important factor for real estate services.

3. Digitalization of documents.

Verification of documents is a very important part of any property buying. Mostly the actual property builders had been used to offer the tough copies in their assets files and confined the attainment to the general public. But digitizing the files and sharing the applicable files to the general public online will now no longer handiest growth the transparency however will also grow the credibility of the project. The customers will be more confident to buy the product even if they are far away. Whether you plan to buy a property, or you want a house on rent, online digitalization of the documents can prove to be very beneficial in order to adhere to the covid-19 norms.

4. Restructuring procurement strategy.

Another big challenge is to procure materials for construction. Because of the travel restriction, many manufacturers were not able to deliver the material at the already-scheduled time. As a result, many manufactures, unfortunately, have to shut down their workspace due to several reasons.  So a big task for the real estate developers is to select the right companies, vendors and suppliers who have the availability of the materials and even can deliver at the scheduled time. They can be chosen based upon the location of the workshop, supplier credibility and company manufacturing capacity. Avoiding international procurement and going for local players, without much hampering the quality would help.

5. Safety management.

The safety of the workers from the virus is too important in the current situation. First, a positive case at the site may completely shut down the work for some days by the local authorities. Secondly, it will create a panic among the workers and decrease the effectiveness of the work. Therefore, it is essential for real estate developers to take precautions like ensuring every worker wears a mask, encouraging workers to keep a distance from each other, washing hands etc. This will not only maintain the workers safe but also will create a sense of assurance in their minds.

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