The pandemic brought about several challenges with numerous businesses being affected monetarily due to complete lockdowns, reduced sales, and work from home mandates. The real estate industry, which contributes to 7% of the GDP of the country, was not spared either, and it took a toll on the business as a whole. This led to developers altering traditional industry methods, to keep up with the new normal.
According to KPMG, the real estate industry has already seen a loss of INR 1 Lakh crore with the net leasing rates dipping by 33 percent in the last year. The average commercial property prices have also seen a dip by 7-10 percent, as per a Cushman and Wakefield report. Let’s take a look at why this industry suffered so much.
With the lockdown being implemented, most of the migrant workers were forced to return to their hometowns as the construction projects were being paused. With the lack of labour force, the real estate industry, being a labour-intensive one, was impacted heavily. Along with this, the share market was similarly affected with prices falling during the nation-wide lock down.
Top Builders were forced to pause projects which resulted in nominal sales. Commercial real-estate and SEZs were drastically affected, with most businesses being forced to close and corporates pulling out of their leases, not needing the space anymore. This led to empty spaces and no rent, forcing the developers to shut down their properties completely. The residential sector was not as badly affected, however, the buying market did slow down as site visits came to a halt.
Nonetheless, developers made full use of the virtual world by embracing new strategies such as online site visits, digital bookings and payment methods, 3D walkthroughs and 360-degree pictures which are now temporarily the new normal in the industry for the next few years or so.
Although the first few months of the lockdown saw a dip in purchase enquiries, the end of 2020 to May 2021 have seen a considerable increase in sales. With properties and the rupee value having gone down, people with buying capacity in tier-one cities such as Bangalore, Pune, Hyderabad, Mumbai and Delhi have taken this opportunity to invest in new property, especially NRIs and ex-pats eyeing the new rates.
However, for most people, this isn’t an achievable option due to the lack of cash flow. Most developers have also brought to light that the second wave hit a lot harder than the first as the cost of material and construction increased, lack of labour force and the buying demand of about 95% of people went down after the localised lockdowns. Developers also saw a 10% rise in construction costs due to the increase in raw materials such as steel and cement.
According to a recent study, developers believe that with no relief measures from the RBI, the industry is bound to face delays in ongoing projects. Regardless of the challenges mentioned, the real estate industry has bounced back considerably.
At the end of the day, people need homes to live in, and real estate is an essential sector.
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