Covid-19, a jolt to real estate
Like many sectors, real estate is also reeling under tremendous financial stress due to economic crisis triggered by Covid-19 pandemic and the subsequent lockdown. Considered as a key sector for employment generation in the country, real estate was experiencing cyclical downturn even before the novel coronavirus that is ravaging the world now has hit Indian shores. As consequence, country's key realty markets such as Mumbai and New Delhi had been going through slowdown in the past couple of years. Even Chennai and Bengaluru markets were hit by the slowdown.
Hyderabad market was the only bright spot on the realty horizon as the City of Pearls registered a healthy growth in the sector in last two years, thanks to affordable prices in residential and commercial realty space. Decent upswing in IT sector also fueled growth in Hyderabad realty. But all this is a thing of past as Covid-19 pandemic has crippled sector across the country. Covid-19 crisis is a kind of double whammy for the sector which has already been hit by the cyclical slowdown.
Further, the sector is struggling to come back to life even after Covid-19-induced lockdown norms have been eased and the economy has gradually been opened. Barring malls and a few other segments, all sectors have been permitted by the government to operate with proper Covid-19 safety norms. But construction activity, the backbone of the realty sector, is yet to take off. Migrant labour play key role in real estate construction. With migrant workers heading back to their native States and places, builders are finding it a Herculean task to hire adequate number of workers at their construction sites. In addition, prices of cement and steel, the key inputs for construction, have gone up, thus pushing up construction cost. Further, there is a lukewarm response from customers as people are yet to come out of Covid-19 shock.
It will take a while before customers come forward to buy new homes and apartments. Situation is not any different in the commercial realty segment. Against this backdrop, real estate sector expected a much-needed booster shot when Prime Minister Narendra Modi announced Rs 20 lakh crore Covid-19 economic revival package recently. But barring 6-month extension of RERA-approved projects and one-year extension of CLSS (credit linked subsidy scheme) for home loans, the package has not offered anything for the sector. Though RBI reduced key interest rates which might bring down the cost of home loans, such measures will not come to the rescue of realty companies and improve their liquidity unless sales pick up. National real estate body Credai, in an open letter to Prime Minister on Sunday, sought immediate measures to revive the sector.
Pointing out liquidity crunch and stagnant demand, it sought one-time restructuring of debt of realty companies. It also batted for 20 per cent additional credit on existing advances and reduction in home loan rates to five per cent, among other things. Going by the current situation, real estate sector has a rough road ahead. The sector obviously needs support from the government for faster recovery. Otherwise, it will be a while before the sector comes back on track. But faster revival of realty is essential now as it generates largescale jobs.