COVID-19’s Impact on India’s Real Estate Sector

Country-wide survey reveals challenges, needs moving forward.

submitted by CREDAI

The Confederation of Real Estate Developers’ Association of India (CREDAI) conducted its first-ever industry survey across north, east, west and south zones between May 24 and June 3, to assess the impact of the second wave of COVID-19 on the real estate sector in India. Conducted with a stratified sampling method, the exploratory survey witnessed an extensive participation of 4,813 developers from 217 cities, providing crucial insights on industry sentiment and the range of challenges faced by the real estate sector.

According to the report, more than 95% of developers feel inevitable project delays if no urgent relief measures are injected in the sector by the government and the Reserve Bank of India (RBI). These delays are attributed to a range of factors, with 92% of developers experiencing labor shortage at sites, 83% working with less than half the workforce and over 82% facing project approval delays.

Remarking on the study outcomes, Harsh Vardhan Patodia, president of CREDAI National, said:

“The real estate sector showed tremendous resilience in bouncing back on a cautious recovery path post the first wave, despite little relief measures. However, the second wave has prompted us to reflect and re-evaluate the growth path of the industry, and we felt it was vital to assess the challenges faced by the customers and industry partners in light of the recent developments. The findings reveal that the second wave has had a more debilitating impact on the real estate sector than the first wave.”

Added factors, such as a recent spike in construction materials, including steel, cement, etc., have contributed to a more than 10% increase in construction costs for more than 88% of developers. Various financial constraints and liquidity issues are further adding to the problem, with 77% of developers experiencing problems in the servicing of existing loans, 85% facing disruptions in planned collection and 69% facing issues in disbursement of home loans.

The survey findings by the apex body of real estate developers also puts the spotlight on changing consumer behavior, resulting in a slower demand due to a decrease in enquiries and site visits. About 98% of developers are facing reduced customer enquiries, and 42% of developers are experiencing a 75% decline in customer enquiries. Furthermore, the report reveals that the second wave has caused 95% of customers to postpone their purchase decisions.

Patodia said:

“This analysis of responses reflects and encapsulates the views from a large majority of the developers across the country. CREDAI’s survey comes straight from developers and projects the ground reality, and therefore may be more accurate, authentic and credible. We have been very transparent in analyzing the responses, and the report also gives the methodology used to arrive at conclusions. I must acknowledge the efforts of our President-elect Boman Irani for guiding the team spearheaded by Raajesh Prajapati, along with Dr Harshul Savla and Kapil Gandhi, as also the staff members who have supported the team in its efforts.”

CREDAI’s Covid Impact Analysis Report will be shared with the concerned ministries and all relevant stakeholders.

Patodia added:

“We have made a representation to the government citing the current survey and requesting the government to infuse urgent financial stimulus and initiate quick progressive measures to assist recovery. As a part of our presentations, we have requested liquidity infusion, one-time restructuring of loans, an across-the-board six-month extension of completion date by RERA, stamp duty reduction or waiver, moratorium extension on principal and interest for six months and freezing of SMA classification for another year. We are hopeful that the government will consider our appeal and will make urgent interventions this time.”

The apex developers’ body believes that reducing the cost of construction materials, implementing single-window clearances for project approvals and work commencement and allowing input tax credit for all sectors will help business. CREDAI deems that continued and adequate policy support is critical for the revival of the Indian economy, as the real estate sector accounts for 6-7% of its GDP, is the second-largest employer and is a business generator for more than 270 ancillary industries in the country.