COVID-19 Impact On Real Estate: Coronavirus Mayhem Amidst Liquidity Crisis Likely To Dampen Akshay Tritiya

Under-Construction Site
Under-Construction Site

The ongoing Covid-19 virus mayhem along with ongoing slump in the real estate sector will bring an exceptionally dry festive season this year. Gudi Padwa (March 25), Ugadi (March 25) and Akshaya Tritiya (April 16), which usually see a surge of several new launches and customary sales, are expected to witness not much of activity this year.

The Indian real estate sector has been witnessing a slowdown for the last three years. However, the previous two quarters have been relatively better in terms of sales velocity.

The sector has already been choking due to lack of liquidity. The general sentiment among the developers reportedly is to utilize funds received from customers to execute the project and service debt as against spending on new launches.

“The Indian real estate market may witness fewer launches amid many economic risks curbing credit supply in an already liquidity choked economy,” Economic Times quoted Niranjan Hiranandani – national president- ASSOCHAM and the National Real Estate Development Council (NAREDCO), as saying.

Further pressure on liquidity and concerns over Coronavirus (Covid-19) are likely to force developers to decide against new launches in the coming quarters. The construction is also expected to be slowed down owing to limited supply of raw material, which are imported mainly from countries facing higher infection rates.

Although Indian developers source basic construction items like steel, cement, bricks and tiles domestically, there are certain things like elevators and aluminum shutters for which the developers are dependent on China and South Korea.

Like in case of aluminum shutters, it has become popular lately in prefabrication, a construction method increasingly favored by developers for faster execution. The restriction in the import can further postpone construction activity.

Unlike the new launches, a slight uptick is expected in the sales side. Steady ready reckoner rates, reduced stamp duty and GST will push discerning home buyers to close deals. The government has pushed affordable housing through incentives including interest subvention schemes. Home loan rates, too, have declined, making it attractive for homebuyers.

However, if novel coronavirus pandemic persists for longer time, buyers are expected to hold back all the kinds of discretionary expenses for a while.

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