Real Estate Market amid Lockdown

Corona Virus lockdown: Should you invest in a property now?

Who is buying in the current market?

Buyers who would finalize a property purchase during the lock down may not be a large pool.

Most buyers in the market are those who had been sitting on the fence before the pandemic stuck which means that these people may have done their due diligence, paid site visits and evaluated the market well enough but had all along been waiting for prices to fall further.

“These are the people who would potentially close the deal at this point in time as their ability to negotiate with the developer is much higher in the current circumstances,” says a real estate expert.

Non-resident Indians could be another category. The rupee has depreciated close to 10 percent to a dollar and there is discounting on the property due to sheer rupee depreciation. For this segment COVID-19 is a great opportunity to at least book online.

The rupee’s depreciation against the US dollar has been a factor of considerable interest for NRI's considering Indian real estate as the most sensible investment option. ANAROCK’s consumer survey for H2 2019 indicated that for 68% NRI participants, real estate was considered the best asset class for investment, followed by 16% favoring stock markets.

As worrisome and troubled as the current situation is, it is also a highly opportune time for NRI's to invest in Indian real estate and book profits on the back of currency depreciation, record low prices and organic impending growth of Indian real estate markets, Anarock said..

The third segment could include the investors who, having burnt their money in equity, may not be looking to pick up some stressed real estate assets. “These investors are not particularly interested in the configuration but concerned more about the long term asset and the returns it would fetch them,” says a property broker.

How will corona virus affect Indian real estate?

In an exclusive interaction with 99acres.com, Rohit Poddar, MD, Poddar Developers Ltd, talks about the outbreak of Corona virus and its impact on the Indian real estate industry.

 India heavily imports articles used in construction activities from China. Some of these are - 

·         Iron and steel products

·         Technical construction equipment

·         Electronic equipment

·         Plastic and fibre elements

·         Solar panels

At a production capacity of 928.38 million ton (MT) in 2018, China remained the largest producer of steel. Although India is the second-largest producer, it lags severely in terms of production capacity, which stands at 106 million ton. This heavy reliance on China for steel and steel products is a cause of concern for the industry. With production in China going down, the prices in the allied industries are bound to increase, thereby increasing the costs and reducing the profit margins of real estate developers in India. The slowdown in the construction industry in China will have downward price pressure on global metal prices.

According to a recent report by CBRE, more than 300 Fortune 500 companies were operating in Wuhan, China, in 2019. The outbreak would compel the companies to offer more flexible work practices such as ‘Work from home’ and not co-working spaces. The businesses might delay real estate decisions and restrict new launches. However, the report points out that mainland China will be more affected by the outbreak, and neighbouring countries might only have a transitory dip in business activities.

An opportunity?

If we look from the Indian business perspective, the coronavirus outbreak might be an opportunity for Indian businesses to increase the production capacity and give a thrust to the “Make in India” campaign.

The Indian Government is encouraging the steel companies to increase production capacity and grab a larger market share. The Ministry of Steel, Government of India, is preparing a strategy paper for producing 10 million tons of special steel at the cost of Rs 50,000cr with 50,000 employment potential in the present scenario.

As the Chinese supply lines are skewed, the industry has an opportunity to explore other markets to procure raw material and decrease dependence on Chinese imports. This could be a blessing in disguise for the indigenous production of imported goods such as metal panels, steel bars, heavy machinery and coke.

Further, the solar panel manufacturing companies can also benefit from the reduced supply and increase production to bring down the long-term cost.

Echoing the same sentiments, Pankaj Kumar Jain, Managing Director, KW Group, says, “The effect of coronavirus outbreak on Indian real estate industry will be indirect. Though China is directly affected, the supply side constraints present an opportunity to explore other avenues for raw material procurement. The industry is already facing the headwinds of global economic slowdown and tepid demand. Though the outbreak is not yet a threat in Indian scenario, the Government must take tough measures to prevent the spread of infection so that the business sentiment is not affected further.”

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