Impact of Lockdown Extension on Indian Real Estate Market
As the adverse effects of pandemic can already be seen across the world, a varying opinion is coming up in regards to the impact on real estate due to extension of the lockdown up to 3rd May 2020. The nation is taking extreme initiatives to prevent the outbreak of COVID-19, but real estate market has come to the grinding halt across the nation. With slower economic growth last year in India, the extension of lockdown announced on 14th April by Prime Minister would further worsen the realty market condition in the 3rd largest economy of Asia. Undoubtedly, every business is hit badly by the global pandemic, but impact on Indian Real Estate market due to extension of lockdown can be a double whammy.
The sectors like residential development are already struggling due to the project delays, low sales for last few years and regulatory changes. Well, the quantum of this lockdown impact would depend on how long the economy will take to be on track again and for how long the lockdown will last after 3rd of May 2020. Many Realty Experts have confirmed that the situation would decline into recession which we saw in 2008 or even worse. Below are some of the impacts that Indian realty market is experiencing due extension of the lockdown.
Delays in Projects and Delivery
Any homebuyer who is expecting to get the possession of the newly purchased home need to get prepared to keep paying the rent and also the monthly instalments for few more months as project delivery would be deferred due to extension of the lockdown. Just because of the lockdown extension, the Construction Projects are incomplete and this has put the project into complete standstill.
According to experts, the project delivery may get delayed up to 7-8 months as completion would take time after lockdown is withdrawn because of supply disruption and National Green Tribunal ban on construction last year across NCR. The delay in the project completion and delivery will depend on the period of the lockdown and for how long it is extended after 3rd May. Once the lockdown is lifted, the developers would take time to resume the construction job in full swing because most labours left for their house during lockdown.
Disruption in Demand and Supply
During this situation of uncertainty, many people are deferring the plan of making a new purchase in realty sector. This has lead to a huge decline in the sales of homes and apartments across India. The sales in housing market have plunged by 42% in 1st quarter of 2020 over the corresponding period back in 2019.
Most of the Property for Sale in India is usually scheduled during festival seasons which fall in months of March till May. So, due to the extension of the lockdown till 3rd May 2020, most of the homebuyers and investors have referred their plans for buying a property in 2020.
However, a welcome move has been taken by the government and allowed the construction activities in municipal and rural areas. But, the biggest challenge faced by the government is unemployment and turbulence of the migrant construction workers. This welcome move may solve the issue till certain extent and boost the realty market and construction sector which is undergoing turmoil because of liquidity crisis and extension of lockdown. Experts suggest that relaxation in urban areas and special financial packages for construction and realty sector can help the realty sector to come on track gradually and contributes towards the growth of country’s economy.
Price Responses During Lockdown
As per many realty experts, the prices of realty market would hugely remain sluggish, but it is expected that it would go up once the lockdown is lifted. But, there will be no alteration in the prices because no transactions are going on during lockdown. So, the prices will remain stagnant. Moreover, the market condition in India is already challenged for some time now and all possible discounts were offered by the respective developers which are factoring into current pricing. So, there is no chance of any rate reduction after lockdown is resumed.
Most of the realty experts have already confirmed that the global businesses would soon see a huge surge once the lockdown is lifted and pandemic dies down. Indian realty market would see a gradual growth in coming quarter, but will benefit after the recovery.