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Real estate sector may not be much affected by the Corona crisis

Real estate sector may not be much affected by the Corona crisis

With a 21-day countrywide lockdown announced by PM Modi on Tuesday evening in the wake of the Corona virus pandemic, the big question now pertains to the impact that it is going to have on the Indian economy in general and the real estate sector in particular.

With a 21-day countrywide lockdown announced by Prime Minister Narendra Modi on Tuesday evening in the wake of the Corona virus pandemic that has hit the country, the big question now pertains to the impact that it is going to have on the Indian economy in general and the real estate sector in particular.

The urgency displayed by the Central government in announcing an economic response task force for Covid-19, led by Union Finance Minister Nirmala Sitharaman, only goes too well to display the Central government’s readiness to fight the expected downturns.

Following a series of measures that were announced by Sitharaman through a live video conference on Monday, the end of Financial Year 2019-20 has effectively been pushed to June 30. Amongst other measures announced by the Finance Minister, the last date for filing of income tax returns was pushed ahead by three months from March 31 to June 30. It was also announced that returns of Goods & Services Tax (GST) for the three months of March, April and May can now be filed by the end of June. Further, the Finance Minister also offered relief on Companies Act compliance till the end of June.

The three-month period provided by the Central government from the beginning of April till the end of June will give a breather to real estate firms to properly analyse their balance sheets and put in place a robust blueprint for the year ahead in order to help tackle financial setbacks suffered on account of the pandemic.

The season during which the virus has hit India presents a few factors in itself which might work in favour of the real estate and help it to sail through the difficult phase. New investments and projects are seldom announced during the closing of any financial year. As per the general trend which has been displayed over the years, there is a marked decrease in bookings of properties by end users. Bookings generally pick up after the end of June when the festive season begins and continues thereafter till the end of the year. Fortunately, Covid-19 has hit India during a period which coincides with the few months of diminished business activity in the real estate sector.

For end users, these three months might however just prove to be the best time to invest in properties, if at all there is a fall in prices, instead of waiting for the festive season later when there is definitely going to be a spike in rates.

Through the video conference, the Union Finance Minister increased the default threshold for triggering bankruptcy cases by a massive margin up from Rs 1 lakh to Rs 1 crore. A number of MSMEs engaged in captive production to meet ancillary and tertiary needs of the construction industry are expected to greatly benefit from this decision.

For the real estate sector, there is light at the end of the tunnel in the fact that an economic package will very soon be announced by the Central government for dealing with the economic distress as was promised by the Union Finance Minister during the briefing. Prime Minister Narendra Modi has already announced an initial package of Rs 15,000 crore which will be earmarked exclusively for boosting medical infrastructure and providing safety gear to medicos in order to fight the pandemic. Several state governments have already announced financial packages including the government of Kerala which has promised Rs 20,000 crore and that of Odisha which has set aside Rs 200 crore.

The virus, Covid-19, which originated and spread rapidly in China, has subsequently affected the country’s robust manufacturing sector, before spreading to Europe and other parts of the globe. In a globalised economy, India can no longer afford to be complacent with the thought that it can remain insulated from the after effects of the viral pandemic irrespective of the extent to which Covid 19 spreads in the country. India is in the initial stages of the viral outbreak at present and the Central government has done well to impose a lockdown so that the country’s vast workforce remains shielded from the virus.

A huge segment of India’s unorganised workforce – particularly unskilled manual labourers – is engaged in the construction industry. China’s workforce has been hit by the viral pandemic, in the absence of timely intervention, which threatens to destabilise the country’s manufacturing sector. In India, the unorganised workforce is that rung of the socio-economic ladder which is the most vulnerable to the viral pandemic. This workforce needs to be protected at all costs in order to avoid a Chinese rerun in the country. With the announcement of a lockdown, it is up to the government now to find proper channels of relief and support for the workforce. Various basic steps can be taken in this regard including clearing of pending dues, issuance of food stamps, provision of top-up relief or provision of cash through Direct Benefit Transfer (DBT) accounts.

State governments, including Delhi and Uttar Pradesh, have already announced measures to provide interim relief to daily wage labourers who have been thrown out of work due to the sudden lockdown. The Central government is also expectedly working along these lines to mitigate the adverse economic impacts of Covid 19 on the country’s workforce. The main challenge for the economic task force will be to assess the extent of the impact in the unorganised sector, including real estate, for which official data is hardly available as compared to the organised sector where all parameters are properly measured and mapped. The private sector and state machinery at the district level can join hands with the Central government to assess the situation and help provide relief and assistance.



Axiom Landbase

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