In the Indian scenario, we look upon festivals as auspicious times to make a new beginning. For real estate, Gudi Padwa is traditionally, the day when all new beginnings – be it booking a new home or moving into a new home – are considered to be done on an auspicious note. This year, things are a bit different, with the Corona Virus pandemic impacting all sectors of the economy.
The ‘challenging scenario’ is something real estate has been dealing with since the economic and policy reforms were introduced; the impact of what I call the ‘tsunamis’ – demonetization through RERA and GST, among others – was major. Buyer confidence reduced, sentiments were impacted and sales dropped to low figures. Add to this the credit squeeze and last mile funding challenge, not to forget the NBFC crisis, ILFS and DHFL. Result: troubles compounded.
In this extremely challenged scenario, housing, as a basic need, saw the buyer return. Not as much as would have been optimum, but still, the buyer was back, prospecting for the ideal home to buy. In this situation, we now have the pandemic, COVID-19.
Logically, the lock-down that COVID-19 results in, first impacts sales. Real estate is in that situation, where the home buyer was gradually returning, but COVID-19 has been a speed-breaker of sorts. The slowdown since end-February is apparent; and while site visits are marginally down, the decision-making process is hugely delayed.
The Pandemic menace has hit at a particularly sensitive time, that of the Financial Year closing (31 March). Across real estate companies, this is the time when statutory payouts and streamlining of balance sheet happens. This is a challenge for real estate as an industry, a representation has been made to the Government of India about a few economic intervention measures like rescheduling loan repayments, a one-time rollover for debt restructuring and deep interest rate cut – these will help salvage the economic challenges for real estate companies.
Coming on the eve of the festival, this is important because real estate is the second largest employment generator, and has a ‘multiplier effect’ on 250-plus allied industries need the support to face the challenge. This year’s on festive occasion of Gudi Padwa/Ugadi might see drop in launches across and delayed sales deal closure, with a direct effect on site visits by potential buyers.
When it comes to commercial real estate, the impact of COVID-19 in form of shutdown of retail outlets and malls as also entertainment and fitness centers has put commercial real estate deals on ‘wait and watch mode’.
Salvaging Indian real estate is critical, not just from the GDP growth perspective, but also for employment generation. This Gudi Padwa, if the Government of India has taken quick fiscal measures, the real estate industry will be able to save jobs and capital erosion, as also avoid default in payments. That happening, Gudi Padwa this year will truly be a festival of hope.
– Dr. Niranjan Hiranandani, President (National) NAREDCO as also President, ASSOCHAM