Previous year was a disaster to the world economy as its stop the revenue-expenditure cycle and the one sector that was the hard hit was Real Estate. According to a report by real estate consulting firm JLL, the Indian real estate sector unsold inventory The unsold inventory rose from 4,42,228 units in Q4 2019 to 4,55,351 in Q1 of 2020. Another report by India Ratings and Research (Ind-Ra), the ongoing COVID-19 pandemic has pushed the overall residential demand down by 25 percent from 2019.
Prior to the pandemic, the Indian real estate market was growing at a tremendous due various factors such robust occupier interest, rise of organised real estate developers, and the entry of institutional capital but it was reduced to the slowdown in the market as people diverted their surplus and disposal income into future miscellaneous expenditure such as medical bills and other savings. Due this, Indian economy also suffers as Real Estate is one of the biggest and important revenue generating sectors in India. India’s Gross Domestic Product for the first quarter of FY21 showed a decline of 23.9%, lowest since 1979.
But when India announced success trial and vaccination process for Covid-19 pandemic, situation is becoming more controllable. India becomes the fast country to reach a milestone of 6 million immunisation in just 24 days and also become a hub for covid-19 vaccines around the world producing more than 25 million and also distributing to foreign countries.
With the immunisation of more and more people, Indian economy can open up fully. But another shot in the hand which people are missing is the Union Budget 2021 which was expected by many to help them. For Real Estate Sector, the budget was aimed at the priority need of Affordable Housing for All and Infrastructure Development. Ministry of Housing and Urban Affairs was granted Rs 54,581 crore in the Budget. But there were some misses that the government should have addressed such as the industry status for the whole sector and single-window clearance for smooth functioning which is the long pending demand for various real estate players.
However, the full recovery for the sector is a long journey as both companies operating the sector and government need to work together, find out problems and solve them. Starting with employment opportunities as real estate is the second highest sector after agriculture to employ untrained and semi-trained people in its workforce and these people were the biggest losers as they were forced to migrate back to their homes in rural India during lockdown. Some government should employ them back in special programmes such as building affordable housing, creating new infrastructure such as bridges, roads in strategic locations etc which will resolve 2 problems – employment and infrastructure.
Second can be if government incentive the sector for a limited duration of time until the sector fully recovers. Repo rate cuts, lower home loan interest rates and affordable home loans is the need of the hour as it will reduce the financial stress on the buyer and full monetary circulation can be started again in the sector.
The last but not the least thing is introduction of new building and infrastructure technology. Many of our projects struck due to the delay incurred by lack of technology available in our country and then we have to rely on foreign assistance. The biggest example is the tunnel and hydro projects which take years to become feasible on map and complete. By developing new construction techniques and building technologies, long term and duration projects can be completed in limited timeframe without adding production costs which results in overall cost increase draining huge taxpayers money.
The year 2021 will be going to be crucial and critical for Indian Real Estate Sector. The focus for everyone be it government or private players should be reviving the sector with reforms and steps which can in turn put back the economy on track. Real Estate supports other industries such as cement, steel, ceramics etc and can have a trickledown effect if real estate is stabilized.