Indian real estate could be staring at a loss of at least Rs 1 lakh crore and project delays of up to 15 months thanks to the ongoing economic crisis due to coronavirus, said NAREDCO President Niranjan Hiranandani. If the current economic climate continues, a price-correction, he said, could well be in the offing over the next two years.
“Prices will come down because lots of developers are desperate to sell, but we have to see how much money is available in the economy and how many jobs are lost,” said Hiranandani, speaking to reporters. “Prices could correct by 10 to 15 percent depending on a project’s location. But the question isn’t that of correction, it’s that of demand. Even if prices fall, will we have demand?” he asked.
Given the projected demand erosion, Hiranandani said that India must take a cue from the United States, Japan and the European Union, and offer an economic stimulus that is 10 percent of the current GDP.
“Our GDP is $2.8 trillion. We need a stimulus package of $280 billion,” he said. "We have only asked for 200 billion dollars as a package that we are looking forward to from the Prime Minister.”
A part of the reason the real estate industry finds itself in the doldrums is that the ongoing economic crisis has been exacerbated by what is turning out to be a labour crisis in construction.
“Nearly 23 percent of India’s migrant labour force is unemployed. This is something we need to address to take care of this sector,” said Hiranandani. “Many workers are not available because they are mobile, and also because they have been going back to the villages.”
Then there’s also the case of several construction workers moving back to villages to partake in agricultural activity, which is bound to continue till the end of June. Even a situation which sees this workforce make its way back to the cities to continue real estate construction work would be rendered pointless thanks to incoming monsoons, which could throw a spanner in the hope that real estate projects will get back on track and complete on time.
The situation had caused
real estate developers to seek a lifting of the lockdown on real estate projects, even as the Maharashtra RERA granted a three-month extension on project completion deadlines.
Real estate consultant NAREDCO said today that the crisis in residential and office-space markets could lead to developers actively looking at alternate asset classes like Warehousing and the construction of data centres to ensure business and cash-flow in the market.
Anarock predicted that home sales in India could fall by anywhere between 25 and 35 percent this year, with affordable housing segment taking a bulk of the beating.