Will the Real Estate sector revive after Covid19?

The real estate, construction, and urban infrastructure sectors have been completely neglected in India during the lockdown. However, reports prove for the probability of the real estate revive after COVID19.

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Indian Real Estate Revive

It is perceived that the real estate business can be a major driver for reviving the economy in the post-COVID world. Mushrooming urban slums and the exodus of migrant workers during the two-month lockdown period highlight the failure of urban planning in India. However, reports prove for the probability of the real estate revive after COVID19.

The real estate, construction, and urban infrastructure sectors have been completely neglected in India, unlike other nations such as America where the growth of these industries is considered as major economic indicators.

The government should give importance to the real estate sector, even more than the MSMEs, as it has the potential to absorb many unemployed people and revive the real estate sector. The demand slowdown is not because of the demonetization, the GST, and the new realty law RERA but due to wrong urban development policies.

The real estate and construction sectors generate the most direct and indirect employment and are the biggest multiplier of the country’s GDP. It requires major structural changes to correct mistakes committed over several decades. Unlike in other industries, it is not easy to correct mistakes in the real estate where construction of buildings has taken place and one cannot demolish it. This is one of the major reasons for the real estate revives after COVID19.

The government’s urban policies should have facilitated the development of satellite towns by private sector players to cater to the migration of people from rural to urban areas. Urbanization and infrastructure of urbanization are big issues that should be examined and set right.

However, the real estate sector will experience staggering revival, the long-term outlook in the coming 18–24 months may likely emerge positive. Albeit social distancing norms and workplace health safety regulations affecting contraction, the real estate industry’s structural transformations will bring forth latent opportunities within untapped real estate segments such as data centers, integrated supply chains, warehousing, self-sustaining industrial parks, design efficiency processes.

KPMG sees pre-Covid19 challenges related to subdued demand and liquidity pressures to continue creating a slowdown in sales in the short and medium-term. Also, a credit crunch is expected to create residential sales contraction, bringing down sales from 4 lakh units in 2019-20 to 2.8 lakh-3 lakh units in 2020-21 across in the top 7 cities.

Some companies like Godrej Properties, the fastest growing of India’s real estate majors, saw a surge of NRI (non-resident Indian) customers as well as a huge pick-up online sale during the COVID-19 lock-down. Despite a harsh lock-down in place in India during most of the Apr-Jun quarter, the company managed to sell a whopping 2,130 homes during the three months, considerably higher than what was seen in the same quarter last year. In all, the company sold homes worth Rs 1,531 cr, higher than the booking numbers seen in five out of the last eight quarters. During the same period (Apr-Jun) last year, Godrej properties had sold only properties worth Rs 897 cr.

In addition to capitalizing on the intervention proposed by the government, the industry should resume operations post lockdown. That can be done by leveraging technology innovations for enabling employee and consumer health safety standards, design flexibility, cost optimization, and consumer engagement-focused localization of supply chains, reorganization of business models. These are likely to accelerate the real estate revive turnaround over the coming months.

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