Impact of COVID-19 Lockdown Relaxation on Real Estate Sector

• @kw
• 23 Jun 2020

The Construction activities had come to a complete stand still since 24th March but the announcement by government to resume construction activities in non-hotspot area on 15th April came as a breather to developers. As per estimate published by KPMG there are projects more than Rs. 59 lakh crore under development stage which employs over 49 million people. The construction workforce 12% of the Nation’s workforce. Although the construction activities have resumed in many areas but with lot of regulatory restrictions. The normalcy in construction activities will take more time due to various reasons. A major part of the labor force have gone back to their villages due to acute crisis faced by them in the cities due to complete shutdown and there for construction projects may face labor shortage for next few months, unless these migratory workers return back to their work. And also the financial crisis now faced by many real estate companies is a challenge. However there are both positive and negative impacts of the lock down relaxation. 

A Relief for Home Buyers, Investors & Developers

Large number of home buyers and Investors in various projects was in dilemma in fulfilling project completion targets. The recommencement of the activities in real estate sector will also ensure significant cash flows specially the projects that are nearing completion. It will also bring more confidence into the minds of Investors and accelerate investments into the sector. This is definitely sent a positive message across the board.

Adapting to Newer Technologies

Pre-dominantly Real Estate is a traditional sector where operational methods follow a certain fixed approach. Due to lock down lot of activities started taking help of technology such as online project booking activities using Skype, What's App, Google and other apps. Work from home has become much easier using online conference through Microsoft Team App, Zoom App etc. Customers are also getting used to the online platforms offered by most of the reputed builders. Cost of supervision is also expected to reduce by using artificial intelligence, drone technology and other analytical software for supervising and monitoring the construction process. Adapting to these new technologies is helping the real estate sector in many ways including cost reduction, efficiency improvement and optimum utilization of human resources.

Stabilizing Property Prizes

Due to lock down the prices of housing and commercial properties were slowing sliding down and many real estate builders had started offering discount in the prices and also some were offering lucrative financial deals. Some builders were also expecting the price to go down further but this move by Government to allow construction activities to resume will help the prices to stabilize soon.

Workforce Constraints 

A huge number of migratory labor forces have left the site and have gone back to their villages within the last 15-20 days. The real estate sector is going to face major crisis   for getting the construction work done at an accelerated speed due to lack of construction labourers. However RERA has allowed a leeway of 6-months to complete the from their earlier committed date for handing over of projects. Real estate experts are assuming that the morale of these workers is too low to allow efficient operations and at the same time once the lock down is completely lifted, there may be further exodus of construction laborers. 

Shortage in Raw Material Supply

Due to irregularities in transportation and slowdown of work in basic industries including steel, cement and other related industries Construction projects are facing shortage of Raw material supply. This will take at least 3 to 4 months to normalize. However the phased reopening of economy will facilitate an upward trajectory of growth and will reduce the overall estimated loss of Rs 26,000 crore per day, faced by the Indian market.

Changing Habits

The lock down due to COVID 19 has taught everyone the minimum requirement for maintaining better hygiene through social distancing, using face mask, focusing on sanitization. These have become mandatory at work place and over a period of time it will form a habit.