How the aftermath of Covid-19 spurs advantages of owning a home
Covid-19 has and is creating a wave of destruction throughout the world. The pandemic has resulted in terrible effects on various industries including, livestock, stock market, textile, and the real estate community. This blog gives a brief on the aftermath result of Covid-19 on the real estate sector and how a homeowner can benefit amidst this crisis. The key elements highlighted in the blog are:
- Impact of Covid-19 on Indian real estate sector
- Advantages to homeowners
With constructions at a halt and the public shying away from buying in-development houses, the real estate industry in Mumbai will take a considerable time to redeem its pre-covid-19 stance in the market. The property market reacts differently to a crisis as compared to the stock market.
Covid-19 impact on Indian real estate sector
The interdependence of supply chains, migration of laborers, cost overruns, and liquidity constraints are some of the looming challenges.
Imports from China
India imports distinct construction materials from China like iron and steel products, technical construction equipment, electronic equipment, plastic and fiber elements, and solar panels. Though India is the second-largest producer of steel, it lags in the production capacity. This immense reliance on China is one of the major concerns for the Indian real estate industry.
Impact on commercial real estate
According to a recent report by Cushman and Wakefield, the Indian commercial real estate segment is relatively stable and not as volatile as the stock market. However, with the global supply chain getting affected by the pandemic, the feeder impact will be seen in commercial markets as well. If the immediate-to-short term effect is considered, commercial leasing and co-working activity will be hit tremendously. However, in the longer term, the commercial real estate segment will be the quickest to bounce back.
Impact on business expansions
In a survey jointly conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Dhruva Advisors, 72 percent of the total survey respondents said that they are experiencing high-to-very high levels of negative impact on their businesses. As per a separate question in the survey, around sixty percent of the respondents have deferred business expansion plans for 6-12 months. With domestic and international flights being mostly non-operational owing to the extended lockdown, a substantial number of respondents have predicted a slowdown in the value of exports.
Benefits of an owning a home amid the COVID-19 crisis
- Attractive home loans
The slash of repo rate by Reserve Bank of India by 0.75 basis point in March 2020 has made home loans feasible for the proposed property buyer in Mumbai. The decline in the basis point has also drastically declined the interest rates on home loans offered by distinct public and private sector banks. The rates are from 7.20% and 8.05%, the lowest in over a decade. This is a lucrative time to invest in a home if that has been your prominent goal in 2020. The March 2020 residential property sales in China stands at almost 95% in comparison to the December 2019 levels. If this bounce back after the lockdown that ended last month in China is an indication of a trend, the Indian real estate market is also likely to witness a similar scenario after attaining normalcy.
- Dropped prices
The pandemic has compelled a drop in the price of real estate property. Experts believe this drop in the value will only be short-lived and the markets will bounce back once the lifestyle is brought back to normalcy. Buyers can take advantage of this drop and make use of the opportunity to invest in apartments higher than their previous budget also. This period, therefore, is a perfect time to invest in apartments in Mumbai. As per a survey report by 99acres to gauge buyers’ sentiments in the times of the COVID-19 pandemic, 60 percent of the Indian home buyers who were in the market looking to buy a house before the pandemic is still planning to buy their homes within a year. The survey was conducted across major cities namely Delhi (NCR), Mumbai region, Kolkata, Hyderabad, Bengaluru, Pune, Chennai, Chandigarh, Ahmedabad, and Lucknow. The survey found that the home buyers showed a strong affinity towards ready to move in properties with 85 percent of buyers believing that ready to move in homes were safer than an under-construction property.
- Virtual site visit
The seamless digital access and property listings online make it easy to discover a property of choice in these times of social distancing. Real estate investment does not seem impossible in these times of crisis. There has been a surge in online property purchase post-COVID-19, and the digital medium stands a good chance for new homeowners to register their investments. “Of the total unsold ready stock, the Mumbai and Pune regions together have approximately 35,200 units, which are collectively worth Rs 37,550 crore. This accounts for 57 percent of the total value of ready to move unsold homes across all top seven cities. NCR is next with 15,600 unsold ready units, followed by Bengaluru with nearly 10,100 apartments. Hyderabad has least unsold ready stock of 2,400 homes worth Rs 1,870 crore,” remarked Anuj Puri, chairman, ANAROCK Property Consultants.
Government contribution to aid relief to the real estate sector
To support the real estate sector amidst this chaos of a pandemic, the Central Government has laid various relief measures. Some of the key measures are as follows:
- Putting forth the relief measures for dejected real estate developers, the Central Government has increased the threshold for initiating default proceedings under the Insolvency and Bankruptcy Code (IBC) 2016, from Rs 1 lakh to Rs 1 crore. This will help keep a check on unscrupulous and frequent insolvency proceedings against developers, especially during tough economic times.
- The Central Government has also assured that if the present strained economic scenario continues beyond six months, it will actively consider suspending Sections 7, 9, and 10 of the IBC (all related to starting Corporate Insolvency proceedings).
- The Government has urged the State governments to utilize the Rs 31,000 crore fund for the welfare of construction workers, so as to minimize the adverse impact of the nation-wide lockdown on the same.
- The release of a relief package to the tune of Rs 1.71 lakh crore will benefit migrant construction laborers.
- The deferment of dates for key filings such as ITR, composition scheme, and Aadhar-Pan linkage will ease the compliance burden.
- In the second round of relief measures, the Central Government intends to roll out a package of Rs 20 lakh crore, including the revival measures taken by RBI.
- The construction contractors engaged with government infrastructure companies have been given an extension of up to six months to complete ongoing projects.
The future of real estate post-COVID-19 is unpredictable. However, now is the time of real estate investment, and one should take advantage of this opportunity if they can. If you are looking for a safe and secure investment in property, Prima Terra, is the best option to consider.