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Tata Capital > Blog > Effects of Coronavirus Pandemic on Real Estate Sector in India

Lockdown News

Effects of Coronavirus Pandemic on Real Estate Sector in India

Effects of Coronavirus Pandemic on Real Estate Sector in India

At present, the COVID-19 pandemic has curbed the growth of multiple business sectors. And the Indian real estate sector is one of the worst affected by the coronavirus lockdown. Visits to the sites continue to fall as sales numbers dwindle and project deadlines are pushed back. Moreover, with increasing supply constraints, the ongoing migrant crisis, and liquidity concerns because of COVID-19, India is facing a severe slump in realty demand and supply.

However, as rupee falls because of the coronavirus induced economic slowdown, the real estate sector hopes to bounce back with the help of NRI investments. Additionally, RBI’s rate cuts, government’s incentives for affordable housing such as real estate investment trusts (REITs), and other provisions are being implemented to resuscitate the declining realty market.

Additional Read – What should you do When Economy is Slowing Down

A Decline in Buyer’s Sentiment

In the wake of the coronavirus lockdown, as concerns about job security rise, many buyers are postponing their property purchasing plans. According to the Indian Chamber of Commerce (ICC), owing to the COVID-19 pandemic, the real estate sector is presently experiencing almost 65% payment default from customers who have instalments linked to construction.

Unfortunately, Indian realty is likely to witness a further decline in residential sales due to unemployment fears and a surge in property prices. Likewise, commercial real estate for leasing and co-working utilization has been hit hard as remote working is encouraged to control the spread of coronavirus.

Disruption of Demand and Supply

Because of the ongoing COVID-19 pandemic, thedemand for real estate has become particularly slow. As unemployment fears loom large, even the prospective buyers are drawing back on investments.

Furthermore, delivery of projects is severely affected due to supply chain issues and a lack of labour post the coronavirus lockdown. With limited supplies at disposal, construction activity for various residential segments is on hold and will remain so, for the near term. Besides, builders are unlikely to receive new projects as existing projects stay unfinished.

Lack of Raw Materials for Production

The real estate developers are facing difficulty as a lack of essential raw materials, and manufacturing equipment has halted the construction activity. With the imposition of international trade restrictions owing to COVID-19, India’s supply lines have been struck short and unfavourably as China happens to be the major supplier of raw materials to India.

As a result, projects under-construction can experience a delay of three months to a year for completion. Reliance on domestic markets for essential raw material is possible; however, with coronavirus lockdown in place, the production activity is presently limited. This scenario will adversely impact project delivery, thus incurring a high overall cost.

Additional Read – Investing Advice by Experts in Post Pandemic World

The Bottom Line

There is no denying that the coronavirus pandemic has adversely impacted the real estate sector. However, if you are a financially stable investor, you must leverage the recently lowered home loan interest rates to make a valuable realty investment.

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