Will Coronavirus (Covid 19) trigger a real estate crash in India?
Will prices of real estate in locations like Mumbai, Bangalore, and Delhi fall badly?
Will real estate in India collapse completely under the shadow of the Coronavirus impact?
There are many such questions that many stake holders in real estate in India are grappling with currently due to the unprecedented impact of the Coronavirus. We discuss some of the possibilities, although predicting anything at this point in time would be highly immature.
Real estate in India will surely be impacted hugely due to the Coronavirus pandemic. The past couple of years have been extremely challenging for Indian real estate market with multiple hurdles including a very slow Indian economy.
2020 was supposed to be a year that could possibly turn around the fortunes of the real estate market in India.
However there have been various updates with regards to the fall of various well know real estate development companies in India sending jitters down the spine of many connected to the Indian real estate business.
In spite of such setbacks, with the help of the Indian Government and due to the strong organic demand for homes in India, the hope for real estate resurgence was good.
Now with the emergence of the Coronavirus (Covid 19) threat for the world as well as for India, the adverse impact on Indian real estate is being feared. For now, the dangers and perils of Coronavirus have compelled every human being on Planet Earth to value life in its true sense. The effect that this pandemic will have after the havoc it wreaks will surely have a massive impact on the Indian real estate as well as on the Indian economy overall.
As things come to a screeching halt in terms of movement of people, goods, etc. the overall economy will take a major blow in the months to come. Apart from that the Indian stock market has been in kind of a free fall since the past one month. The performance of the Indian stock market is a more or less a sure way of predicting the health of the Indian real estate market as well.
Almost everyone connected with real estate in India has a common question “Will the Coronavirus episode take real estate India down to a rock bottom?” Many property pundits in India are predicting that it will and that the property market in India will be badly affected due to the Corona Virus pandemic in the coming days and months. With an overhang of years of real estate inventory in key locations in India including in the metro cities of Mumbai, Pune, Delhi, Bangalore, Chennai and also in other important locations like Hyderabad, Goa, Nashik, Nagpur, Chandigarh, etc., this fear is not unfounded.
Recent hurdles for real estate in India
In the past few years, the overall real estate market in India has also suffered a serious correction due to a lot of important protocols and rules introduced the authorities. These include the implementation of RERA across the entire Indian real estate market. With real estate construction, marketing and all other factors in each Indian state being governed by the RERA law, the overall confidence of customers in the Indian real estate story has gone up. However, the initial teething period during the RERA implementation caused a lot of real estate deals and transaction to slow down in India since alignment for every concerned real estate player took some time. Along with this, the GST factor applicable to under construction projects in India definitely caused a lot of potential home buyers to defer their decisions to book homes in ongoing projects. Many buyers preferred to wait for the project to complete, receive an occupation certificate, be eligible to be free of GST and then buy a ready to move in project. This move was definitely causing them to pay a premium because of the project being ready but many buyers were overlooking this as the initial GST cost appeared too high to them. The authorities have since substantially reduced the GST charges on under construction projects in India and now things had just started moving for the under construction projects.
Crucial time for Indian real estate
The three months of March, April and June are considered to be extremely important for real estate in India. There are multiple reasons for the same:
March is the financial year ending in India and many property buyers / investors invest in Indian property just before the end of March.
March/April also marks the end of the yearly education of kids in India Schools and this is a time when many families plan to move their homes and take major property buying and selling decisions.
Also after these months the whole of India goes into the Monsoon season from June and real estate In India traditionally slows down till the end of August. The movement generally then begins from the month of September onwards for Indian real estate. This is the general trend that Indian real estate has followed since many years.
Now with the unprecedented lock down of entire India due to the Corona Virus pandemic, the Indian real estate along with the Indian economy is staring at a major challenge in the days and months and even years ahead.
A look at key real estate markets in India
If one were to cast a glance at the numbers in key real estate markets like Mumbai, the situation does not look too good. Whatever little sales momentum that the property developers in Mumbai managed to generate was simply due to the deep discounts that were being offered to waiting-for-the-kill buyers. Now with the unimaginable adverse impact of the coronavirus hanging on the Indian real estate markets, property investors and even actual home buyers will either go into a shell or demand unreasonable amounts of discounts on property prices. The property developers would find themselves sandwiched between a rock and a hard place for sure. Further discounting on property prices could render the real estate project unviable and bad sales will see the developer’s interest costs spiraling along with other costs of course. The scenario across other major property markets like Bangalore, Pune, Delhi, Chennai and Hyderabad is similar as well.
Cutting down on profit margins
The best that a real estate developer can do in such a scenario is look to cut property prices further. Money lenders, banks and other financial institutions will have to be lenient with regards to heir principals as well as interest.
Is there still hope for real estate in India?
They say that every cloud has a silver lining and that every adversity also has hidden opportunities. All the stake holders in the real estate sector in India would sincerely pray and hope that once this crisis is over, once the precious lives are safe, may Indian real estate also find some divine formula and strong resilience to rise above and move ahead. The fact that India real estate is still driven majorly due the organic demand for housing could still be the salvaging factor if all property stakeholders play their part prudently.
