Moneycontrol PRO
Open App
Upcoming Event : Traders Conclave 2022 | India's Largest Retail Stock Investors & Traders Residential Conclave

Coronavirus impact | Real estate sector may take three quarters to revive

Affordable housing may be the first segment to recover

Rohit Poddar

Food, clothing and shelter have been the prime necessities for individuals and families for several generations. Owning a house is the biggest goal for most buyers. But, for the past several years, the sentiment has not been in the favour of the sector.

The emergence of mutual funds and SIPs opened newer and powerful avenues for people to invest in, which resulted in low return on investment from residential apartments. People preferred to rent an apartment and invest a major part of their savings in the market to ensure huge returns.

Adding to this was the rising price of apartments in the cities and overall maintenance cost of the purchase. This led to an increased number of unsold apartments across categories in the country. Looking at the sector’s condition the government introduced several measures such as RERA, PMAY, and GST along with tax benefits to infuse demand in the sector.

Following these measures the demand for real estate gradually increased, especially in affordable housing along with mid-income housing. For the last two years the demand for both these categories has been phenomenal which has made several luxury players venture into the affordable housing segment.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

What looked like a good year for growth, 2020 has become a challenging year for all sectors. COVID-19 has brought the entire economy to a halt. It is estimated that it will take three quarters for the real estate sector to revive but affordable housing may be the first to recover because of the following reasons.

Mutual funds, SIPs are subject to market risk- Realty check

It is estimated that people have lost approximately 50 percent of their long-term savings which were invested in SIPs and mutual funds. Growing concern about security of the money saved in banks has also resulted in a change of perception amongst the public. Banks today are in debt because of NPA’s and defaulters. Considering the current condition and the public perception, it is highly likely that people would now want to invest in something that is secure and less vulnerable to volatile market conditions. This is where the real estate sector may benefit.

Lower home loan rates

In order to bring the sector back on the growth track, repo rate has been cut consistently for the last nine months. This has made home loans cheaper and affordable. Considering the current condition, banks are also willing to lend to homebuyers.

Subprime crisis versus COVID-19

When 2008-09 recessions occurred, India came out of it quite well because our banking system was insulated from the West and India did not have a subprime loan crisis. The crisis that the world is facing today is unprecedented. People have become aware of saving more, spending less and investing smartly. Affordable housing was the game changer for real estate and it will take the centre stage post lockdown due to its value proposition. This pandemic has made people realize that real estate is the only real asset in the challenging times. Post lockdown, people would invest in an affordable house as a medium of smart investment.

Impact of the FM’s announcements on affordable housing and the overall real estate sector during COVID-19

The recent financial package announced by the finance minister would help the sector kick start operations and in asset creation. The encouragement given to MSME’s to get them listed on the main board of stock exchange and the infusion of 50,000 crore equity would help them tackle the fund shortage issue. The extension of six months of project completion and liquidity measures would help developers secure immediate working capital requirement post the lockdown. The government has rightly focused on ensuring an ecosystem to provide essential resources to migrant workers and daily wage earners.

Labour codes announced would enable better compliance along with a plethora of benefits for the workers. The Rs. 70,000 crore boost to housing and MIG through extension of CLSS should help in creating job opportunities leading to investment of Rs.70000 crore in housing. This would also stimulate the demand for steel, cement, transport and other raw construction material.

The Affordable Rental Housing complexes for migrant workers and urban poor may help address the housing problem of workers. The revised minimum threshold of Insolvency and Bankruptcy Code (IBC) from Rs. 1 lakh to Rs 1 crore would definitely improve ease of doing business and reduce the pressure on all the sectors at such crucial times.

The author is MD - Poddar Housing and Development Ltd and joint secretary, NAREDCO, Maharashtra
Moneycontrol Contributor
first published: May 28, 2020 03:18 pm
ISO 27001 - BSI Assurance Mark