With the nationwide lockdown being extended to May 3, the real estate sector is set to face more challenges. If realty major Hiranandani Group is to be believed, the sector may see a minimum 20 per cent impact on off-take in the first three weeks of lockdown. "There is no certainty on how much time it will take for recovery and whether it will be a 'return to normalcy' or we will we have a 'new normal'," said Niranjan Hiranandani, founder and managing director of Mumbai-based realty major Hiranandani Group.
The real estate sector is facing challenging times post the regulatory, economic and taxation reforms, which in turn, have compounded by the credit squeeze and debt issues. Indian Chamber of Commerce (ICC) said that the realty sector is witnessing 65 per cent payment defaults from customers for under-construction projects. "The real estate sector, which is already in a slump since last year, is presently experiencing almost 65 per cent payment default from customers paying the instalments linked to construction," ICC Director Rajneesh Shah said in a release.
The lockdown after coronavirus pandemic has completely halted the work at the construction sites. The customers are unable to reach site offices and sales offices. The stakeholders are unable to deliver raw material.
The lockdown 'break' in normal production and sales activities will impact on-going and planned projects, said Hiranandani, who is also the President of ASSOCHAM and NAREDCO. "The saving grace has been the measures announced by the authorities to deal with the economic impact of the pandemic. Whether these will be sufficient for real estate to tide over the challenged times is something we will wait and watch," he added.
Real estate companies are doing sales and marketing activities through digital platforms with social media getting a larger share of the communication roll-out. But it is not the same as was the case before the pandemic struck. Getting the customer back to sales offices will require a new format of communication, said Hiranandani. "These will need to be structured to work at a new, totally different level; something very different from the past," he said.
He added, "I worry about the possibility that property buyers might turn into 'fence sitters'. We are just coming out from one such phase which followed the regulatory, economic and taxation reforms, the worry is that we may slide back into a similar situation."
Sector experts say that the financial institutions need to support the recovery process by providing liquidity to developers and restructuring loans. Besides, the banks should encourage buyers with new convenient products.
Real estate sector substantially contributes to GDP growth and supports 250-plus ancillary industries. It is also the second-largest job creator in the economy.
Real estate sector needs a repeat of what was done post the 2007-08 Lehman Brothers crisis. They ask for debt restructuring with a possible one-time rollover; mergers and takeovers across companies and projects; enhancing liquidity and ensuring availability; relief as regards taxation and levies; ratings either be suspended or not to impact borrowing ability; protection from bankruptcy and insolvency proceedings so that business organisations can complete on-going projects.