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Resumption of construction activity allowed in non-Covid hotspots, but real estate to still face challenges

real estate, real estate in India, Resumption of construction activity, non-Covid hotspots, real estate to face challenges, lockdown

The government must ensure that raw materials are available without any hike in cost because a sudden demand may force suppliers to push cost.

The outbreak of Covid-19 pandemic and phases of lockdown were unexpected. All industries and sectors were forced to halt operations, obey social distancing, improve sanitization at societies and disinfect surroundings. After lifting lockdown partially, many developers – who had managed to keep workers and labourers at project sites – are now allowed to resume construction work. The recommencement of construction activities will send positive vibes across the stakeholders; home buyers, investors, employees and allied verticals. But at the same time, the impact of lockdown on the real estate sector will bring major changes in the sector too.

Health and hygiene: Every labourer has to undergo a health check-up at site. In fact, all labourers would be provided face masks, tissues, goggles and gloves, and those responsible for sanitation and cleaning of the areas would be given coveralls

Workers will take care of health and hygiene more than earlier and think twice before doing anything. This will affect their work efficiency and not be able to perform with the same pace as they used to do earlier!

Shortage of workers and raw materials: Although developers will be able to recommence construction work, but in the long run the sector will face shortage of skilled and semi-skilled workers with completion of each phase.

The government must ensure that raw materials are available without any hike in cost because a sudden demand may force suppliers to push cost. Cement and steel are very sensitive material and in the lack of regulation, even a small hike will affect the affordable housing sector adversely. This is the right time to work on cartelization of both in favour of the construction and infrastructure sector.

Safe Investment: During tough days of Covid-19, people have realized that home is the only safe environment they have. With increasing trend of work from home, the people need to make sure they have a good home and the right spaces for office kind of set up. Post lockdown a new wave of home buying is expected for own use rather than renting as that is the safest place in a pandemic.

Also, the plunging stock market and mutual funds have put a question mark on all predictions of the future of funds and companies. Hence investors will put their money to safe investments, i.e. real estate.

Residential sector: We should not forget that due to Covid-19 all malls, retail, entertainment and commercial spaces have been closed till the next order. This will affect investment in commercial and retail space. As a result, commercial deals may be put on hold in the future and potential investors will turn towards the residential segment to earn secured rental.

Decision of buying may take some more time due to the impact of lockdown, but the residential segment may pick up speed soon. Once again affordable housing will emerge as a preferred choice of home buyers.

PMAY: The PMAY benefits encouraged first-time home buyers to invest in affordable housing. However, as most of the home buyers belong to the working class, many prospective home buyers will not be too certain about their jobs and salary post lockdown. Obviously it will impact their buying decisions. Hence the government must extend the PMAY benefits up to 2025.

Restructuring of payment plans: Assuming the present scenario, many prospective home buyers may not be able to decide to take the responsibility of an added liability of EMIs while paying rent.

So, buyers will either prefer to invest in a ready-to-move-in house to avoid the double burden of rent and EMI, or hold the investment for some time. Here developers need to restructure their payment plan to cushion home buyers till possession in under-construction projects.

source: financialexpress