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Impact of COVID-19 on Real Estate

Posted by Karshni Buildwell on 28 May 2020
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The world has come to a complete standstill due to the Coronavirus, which brings with it not only a health but an economic crisis as well. The pandemic might have also laid waste to your dream of investing in apartments for sale in Gurgaon.

In the wake of this global pandemic and lockdowns initiated across the countries, varying opinions surface about the impact of COVID-19 on real estate. Following is an inspection of the matter.

  • Impact on construction 

As a labor-intensive industry that employs 15% of labor in India, real estate has witnessed a complete set back in the completion of its projects. Ban on sharing one workspace as well as labor migration has compelled a lot of projects to be delayed indefinitely.

Apart from this, India heavily imports materials like iron and steel products, technical construction and electronic equipment, and plastic and fiber elements, used in construction from China. With the slowed down production in China, prices in allied industries have increased significantly, reducing the profit margins of real estate developers. China being the largest producer of steel has placed a price pressure on global metal prices. This has caused an inability to procure the basic raw materials needed for construction and has thus hit the real estate industry considerably.

 How it can be perceived as an opportunity

This global slowdown can be viewed as a time to boost not only the production capacity but also the ‘Make in India’ campaign.

The government has encouraged steel companies to increase steel production capacity and grab a larger market share. A strategy paper for producing 10 million tons of special steel for 50,000 crores with 50,000 employment potential is being prepared by the Ministry of Steel.

This lockdown provides us with an opportunity to look at new avenues for procuring raw material as well as boosting indigenous production.

  • Impact on Sales  

Sales in the realty sector were already curtailed due to mega regulatory changes caused by RERA, GST, and demonetization. To encourage the growth of the industry the center had announced higher tax breaks and lower interest rates on home loans as well as had set up a 25,000 crore stress fund for stuck projects, promoting your plans for investing in profitable flats for sale in Gurgaon

The efforts of the government to encourage lucrative purchasing have been halted by the pandemic as the consumers face uncertainty in employment and drop in income and cash flow. Subsequently real estate sales have dropped by 26% in 9 major markets of the housing industry in the country.

In order to potentially curb the economic damage the RBI has announced a 3-month moratorium on all loan EMIs including home loans as well as has cut down Repo Rate and Reverse Repo Rate, the positive effect of which will be seen only in the medium to long term. Even with these advantages a majority of home buyers have postponed their plans of investing in real estate.

How it can be perceived as an opportunity 

According to Deepak Parekh, Chairman of Housing Development Finance Corporation (HDFC), real estate prices are likely to correct by up to 20%. For potential homeowners with job security and proper cash flow, this will prove to be a lucrative investment opportunity. This pandemic just might come as a blessing in disguise for investing in worthwhile residential projects in Gurgaon.

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