Real Estate In The Times Of Covid 19
The COVID-19 situation remains fluid and uncertainty looms on the possible economic impact of the outbreak. Indian realty sector is by no means an exception.
The festive season which was expected to see a surge in demand owing to auspicious occasions of Gudi Padwa, Ugadi, Akshaya Tritiya, etc, will not be the same this year.
The fear of corona virus has dampened business activities across the globe. The impact on real estate too is significant, especially in the immediate short term. Developers are sceptical about launching new projects considering the current situation.
The Pandemic menace has hit at a particularly sensitive time, that of the Financial Year closing (31 March). This is a challenge for real estate as an industry, a representation has been made by NAREDCO to the Government of India about a few economic intervention measures like rescheduling loan repayments, a one-time rollover for debt restructuring and deep interest rate cut – these will help salvage the economic challenges for real estate companies.
Many nations including India have already pronounced Covid-19 as a force majeure event. In this context, CREDAI has sought the following relief measures. Under Section 6 of RERA, ‘force majeure’ provision, project completion time and exemption from penal charges should be extended by a year.
In view of there being no cash inflow for real estate, Special Mention Assets classification adopted by RBI for delayed payments should be kept in abeyance so that delays in repayments are not reported for the first 90 days.
Commercial establishments like Malls, multiplexes, IT Parks etc. are unable to meet their lease rent obligations. To prevent these businesses from down under, benefits under their insurance cover may be allowed by treating COVID 19 as force majeure.
While all economies are shaken at the moment, all investment assets including the stock market and gold have been vacillating. Real estate seems like a preferred investment option because of the relative security. Most developers today offer 3D views and walkthroughs of their projects, enabling buyers to assess the product remotely. In case of office space segment, the best projects are already pre-leased with guaranteed rental during construction and post possession. For NRIs, opportunities back home are even more appealing with the fall of the Indian rupee.