How COVID-19 crisis changed the real estate market of India?
The impact of COVID-19 on the real estate market could be felt in halted constructions, reverse migration of labourers, reduced demand for houses, and much more. Developers had difficulty maintaining liquidity while the homebuyers lost the urge to purchase properties since the job market got hit badly.
However, the situation post lockdown is not the same anymore. Six months into the global crisis, the real estate market is all set to regain the conscious and welcome homebuyers with demands for ready-to-move-in properties and more.
To maintain cash flow and liquidity, realtors are refraining from investing in any new projects. Instead, their focus is on completing their ongoing projects and releasing most of their unsold inventory. For this, realtors either will keep the pricing slab stable or offer discounted rates to release the severe liquidity stress.
Apart from incentivizing the homebuyers, developers are now depending upon RBI’s recent step to help finance the construction of their ongoing projects. This step provides a cushion to the real estate sector. It will help developers restructure their existing loans with a two-year moratorium without classifying their sites as Non-Performing Assets (NPAs).
Government’s response to COVID-19
Prior to COVID, the Indian real estate market was gradually picking up pieces while dealing with numerous issues for the past few years. However, the COVID-19 crisis had put pressure on the sector, as a result of which, the Central Government had to take certain strategic measures to revive it. The government of India has been a huge help to the real estate sector post the lockdown. The public authority's revival measures for the real estate announced during April to August 2020 are as follows:
Tax reduction
Reduction in stamp duty on affordable housing plans by states like Karnataka (stamp duty reduced to 3% and 2% for properties valued INR35L and INR 20L, respectively); Maharashtra (stamp duty reduced to 3% across properties), and many more. Even the TDS reduction on a property sale by 25% and extension for recording GST and Income Tax helped realtors move gradually.
Benefits for NBFCs and HFCs
In order to relieve the money starved Non-Banking Financial Companies (NBFC) and Housing Finance Companies (HFC), the Indian Government gave exceptional liquidity of Rs 30,000 crore. This helped release the real estate market’s cash flow, one of the prominent borrowers for NBFCs.
Compensation for Migrant Workers
State governments of Delhi, Maharashtra, Gujarat, and Uttar Pradesh, and so on offered monetary help to the migrant labourers for their loss of work and food and transport facilities. The Delhi government had likewise offered to pay rent for those who could not afford their residence. This helped in the continuity of construction projects.
Steps taken by Reserve Bank of India
Reduced Repo Rate
By reducing the Repo rate (75 bps), Reverse Repo Rate, and CRR, realtors are now released from the burden of obtaining the land, and this is helping ventures come out of the asset crunch. Further, the Reverse Repo rate decrease to 3.75% will also help banks maintain liquidity, helping the builders with credit facilities.
Monetary Relief
RBI gave an immediate subsidizing relief of Rs 1 lakh crore, out of which 50,000 crores was reserved for the National Housing Bank (NHB), Small Industries Development Bank (SIDBI) and National Bank for Rural and Agricultural Development (NABARD) and the remaining was reserved to be given in the form of the Long Term Repo Operation (LTRO).
RBI has permitted the office of postponement of Date of Commencement of Commercial Operations (DCCO) to the Non-banking Financial Companies (NBFCs). This office was until now accessible just to banking foundations. The move is relied upon to help land engineers who have assumed praise from NBFCs.
Influence of Technology on the sector
Technology is a fantastic addition to real estate and is changing the way the sector has performed until now. Even before COVID-19, from establishing the primary contact to giving all the information about the property, the sale cycle was performed online. However, the pandemic gave new hope for the builders to move even when the purchasing cycle has been limited to no contact. This is done with the help of progressive innovations like Virtual Reality (VR). The current circumstance has made more real estate agents understand the significance of these innovations towards displaying a property to a customer, to connect with them, and close a deal.