Covid-19 Will Hamper Indian Real Estate Recovery

Have you ever dropped a stone in still water and seen the water create ripples? The ripples expand across the water with an incremental effect. This is a multiplier in macroeconomics. The ripple effect theory states that a single action has an effect on several entities. Such is the effect of the ongoing Covid-19 pandemic. The global catastrophe is expected to keep the Indian real estate sector subdue for the next six months to one year which will force companies to reduce operations, and revisit the planned developments, and expansions said KPMG, the advisory and consultancy firm. They are also expected to come up with counter strategies that will mitigate the impact caused. The focus could be on re-negotiation of contracts, layout efficiency maximisation, and cost optimisation.

The recovery process will, however, create traction and bring some new opportunities within some real estate segments. Chintan Patel, Partner and Leader- Building, Construction, and Real Estate, KPMG India commented that “the pandemic is likely to handicap the real estate industry in the short run impacting more than 250 industries and economic sectors. The financial woes and an unprecedented global crisis of the pandemic have made the investment climate unsettled and no industry is insulated from its impact”. 

The sector will experience subdued demand and liquidity pressures will create a slowdown in sales in the short and medium term. Residential sales will also see a contraction which will see the sales go down from 4 lakh units in 2109-20 to 2.8-3 lakh units in 2020-21 across the top 7 cities. It is recommended that the government support this sector. This will help the sector to perform better by providing additional funding, reducing premiums and fee, etc