The real estate sector has never been in a tighter spot. Riding through a journey of booms and troughs for nearly half a decade, the realty sector was checkmated by a deadly virus when it was mulling thoughts of a revival. Saddled with a mountain of debt, unsold inventory, overleveraged balance sheets, and falling investors’ confidence, the property sector least expected another major hurdle.
The pandemic-induced lockdown looked like the last nail on the coffin of the real estate sector. According to market reports, in the first quarter of 2020, around 78,000 ready-to-move homes valued at Rs 65,950 crore were lying unsold. That is 12% of the 6.44 lakh units present in all the cities.
Unending woes of real estate developers
Already reeling under a barrage of issues, real estate developers were left with no other option but to postpone new launches as the pandemic hurt the sentiments of homebuyers.
On top of that, realty players were miffed when the government asked them to slash prices to clear off existing inventory. Given the market dynamics, reducing prices will only add to their woes, but also crush any hopes of business continuity.
Real estate developers feel that lowering prices may give the real estate sector some interim relief, but this move will damage the reputation of real estate players and affect their businesses in the long term. The real estate sector is the most heavily taxed industry. Around 35-40% of the value of apartments consists of direct & indirect taxes. So, playing into the hands of the government and trimming property prices can prove to be too expensive for real estate developers now.
A radiant ray of hope
However, all’s not lost for the real estate sector. The strict lockdown and work-from-home etiquette have forced many homebuyers to look for a home. And this universal consciousness can be a good tiding for many real estate developers who were swatting flies in the absence of sales.
With the virus showing no signs of abatement and spreading faster than before, people living in rented apartments and small houses have been on a quest for spacious affordable homes in big societies that come with oodles of amenities for healthy and hygienic living. The need for a spare room as a workstation has also led homebuyers to join the chorus.
This trend has been reflected in digital realty platforms as real estate developers observe a spike in inquiries from potential homebuyers. People have saved enough cash during the lockdown to settle an immediate home booking. Those with secured income are looking for a bigger, modern space with loads of air and sunlight.
Thrust for affordable housing
The pandemic has conjured up an uncertain time when people would be looking to save as much as possible, spend only on necessities, and look for healthy living opportunities. This will spur the momentum for affordable housing. With low home loan rates and deferment of the moratorium, people will look for affordable homes with much eagerness.
Real estate developers have to tap this opportunity to sell off existing inventory and infuse fresh liquidity to settle balance sheets. Housing is the most essential item for people right now and end-users will be rushing to buy ready-to-move homes and book under-construction homes. This affordable housing segment can provide the stimulus badly needed by the real estate sector and help realty players to turn the tide in their favour.
Real estate developers planning to build luxury housing projects can rethink their decision and add an affordable housing segment to their blueprints. This will warm up the housing sector and help revive the economy.
Adoption of digital framework
Amidst the gloomy scenario of fewer site visits, realtors must adapt and adopt digital ways of doing business to meet the growing demand for affordable homes. This digital framework of realty, high on technology will bring virtual home visits, 3D walkthroughs, virtual interactions, secure payment gateways, and digital signatures to make homebuying easy, delightful, quick, and secure. With homebuyers increasingly preferring digital tools to shop for homes, real estate developers have to be proactive and accelerate the adoption of digital real estate tools.
With the threat of the virus getting larger with each passing month, it is safe to say that the clamour for affordable housing will get stronger. Real estate developers looking to get a share of this pie have to alter their business models, safeguard the health of their workers, and most importantly join hands with technology to revive their fortunes. The win will come, with time.