With projects cancelled or delayed due to Covid-19, developers say it is difficult to estimate when projects will get back on track, and how growth will be impacted.
As real estate companies attempt to inch back to normalcy in the coming months, there are certain key factors developers are cognizant of, such as impact on labour force availability and tackling the many disruptions to construction component supply chains. All these factors have the potential to cause substantial construction delays and project cost overruns well into 2021.
The pandemic-induced lockdown measures may have stalled delivery, reduced output value and delayed completion date of many realty projects. However, with the domestic situation gradually improving, the challenge that developers face is to have the capability to take on new projects quickly. These were some of the topics under discussion at a recent webinar.
Property site 99acres organised a webinar late last month, where experts spoke on the challenges faced by developers in completing under-construction projects, the prospects of investing in commercial and residential markets and the government measures required to bail the real estate sector out of the current crisis.
Sanjay Dutt, MD & CEO, Tata Housing, said, "Every disruption, whether it be a global financial crisis or sectors going through cyclical issues, brings on consolidation. Like every other sector, real estate is also going through a phase of consolidation."
Noting that the Covid-19 crisis has only accelerated the transition towards the digital medium, Dutt said, “Many investors, not looking at real estate as an asset class 10 years ago, are re-entering the market. The depreciating rupee value has also helped NRIs to reconsider real estate as an investment option,” he said.
On the sales front, Tata Housing CEO said, “While we expected sales to dry in the first quarter owing to the Covid-19 crisis, there have been nearly 50 per cent conversions, which is encouraging. For branded players offering quality projects, there may be a short-term setback, but a gradual revival is certain in the next 6-12 months. With narrow profit margins, a price cut does not seem likely.”
Pradeep Aggarwal, Founder and Chairman, Signature Global Group, and Chairman, Assocham National Council on Real Estate, Housing and Urban Development, said, “Home loan rates are already at a 10-year low, which is currently at 7.5 per cent. Despite this, there is scope for another cut. Banks should have enough funds to lend at low rates.”
Highlighting the challenges faced by developers, Aggarwal said, “Though there is an on-ground issue of migrant labourers, developers are tackling the issue. Be it rolling out incentives to prevent migration of labourers to their home towns or adoption of technology to complete ongoing projects, all possible solutions are being explored."
Mahesh Khaitan, Director, Salarpuria Sattva Group, said, “While it would take 1-2 quarters more for the commercial market to revive, the retail market, being the worst hit, will take a couple of quarters to get back on track.”
Sushil Mohta, Chairman, Merlin Group of Companies and President, CREDAI West Bengal, said, “The government should seriously consider creating rental stock for all income classes. The model needs to develop properly and rental stock should grow in India. For that, we need a lot of reforms like the Rent Control Act.”
Noting that rental housing is needed to house migratory workers, construction workers, etc, Mohta said this could definitely bring the real estate sector back on track.
Rajani Sinha, Chief Economist and National Director, Knight Frank India, said, “While real estate has traditionally been considered a lucrative investment tool, things have changed and there are only end-users in the market now. The current juncture has, however, altered sentiment yet again as stock and equity markets have crashed, mutual funds are dwindling and almost all investments are struggling to make profits. In a situation like this, real estate still holds ground as a lucrative investment.”