The lockdown has brought with it a slew of side effects that have been both positive and negative for a number of people and the industries that they work in. Real estate is in the news because of a record low when it comes to home availability and buying patterns; the stalling of many projects; and a general tumble that the market seems to have taken. In fact, in the second half of 2019 and in the beginning of 2020, it may have seemed that a number of government initiatives were set to revive the real estate market. Yet, here we are, staring an unplanned adversity straight in the face. With a proposed 25,000 Cr INR bailout, the government was looking to restart 6 lakh stalled projects that would give back home owners the power to finally see the light of day as far as their investment plans went. But, is it all as rosy as it seems?
Is real estate set to reach a logical happy ending? Apparently not, as per a number of thought leaders. International Tax Expert and former thought leader at Deloitte, Nemin Shah says, “This scheme entails the fund providing debt to complete viable projects which have stalled. The debt will be required to be repaid upon completion. If implemented in the letter and spirit of the announcement (which usually us a rare occurrence with Government schemes), those homebuyers who have paid amounts to the builder before the project was stalled could end up getting houses. However, given that only viable projects are likely to be covered under this scheme, many stalled projects may not be eligible as they may not be viable – in the sense that there may not be a way to repay the debt taken to complete the project. Hence, this scheme will not benefit homebuyers in a big way.”
The biggest challenge as per Shah remains the one of finding the right projects that would be viable as well. In this age of the pandemic, this seems to have taken on a whole new meaning. Many states in India are already seeking to come out of the pandemic slump and are inching towards registration numbers that could rival pre pandemic times. Yet, the link between the government bailout and the lockdown that started merely a few months later would be the 6 lakh stalled projects that were almost in the completion stage, as recently as November 2019. Are we merely looking at a lockdown induced slump that we have to conquer or were our pre pandemic numbers and the backlog in projects, a more chronic problem?
When we speak of the viability of a single project before and during the lockdown, we would have to speak of the liquidity aspect – after all, that is what is uppermost in the mind of the home owner while writing cheques for registering a home or a piece of property. And liquidity has also become uppermost in the minds of people during the pandemic and the ensuing lockdown. So, is it now a tussle between liquidity and real estate? Have liquidity and real estate parted ways? And would a government bailout help in such a case?
Nemin Shah weighs in, “It will give priority to budget schemes but if a good number of viable projects are not found, then attention could be turned to more high end projects – again depending on the viability. There may be a liquidity crunch. The viability of projects will entail a good number of units being sold. If the number of units sold remain low, the developer may not have funds left at the end to repay the debt.”
So what would an ideal scenario look like? How can the government and the real estate sector steer people towards real estate investments during the pandemic? The mindset shift required here is to look ahead despite all the issues being faced and to plan for a future that we are negatively or positively uncertain of – where we lie on the spectrum of the plus or the minus would depend on our tenacity. But a government push would definitely help us all inch closer to the plus, rather than the minus. In this regard, Shah says, “The ideal scenario would be for the Government to hire professionals from the private sector to handle the fund. The problem with the Government or SBI being involved is that there is not enough expertise available.”
While we are looking at various methods that can help us find viability in real estate investments, digitization cannot be left far behind. Cutting edge AR technology that allows virtual walkthroughs and detailed open house experiences could be the way forward along with campaigns built by influencers and thought leaders in this field as well as related niches. As per myriad reports, the number of enquiries for real estate projects has definitely seen an increase in the past four months, which is also a period where the rate of infection in India grew but the Unlock India campaign has also come into play. Closing deals over video calls, lead generation with more aggressive networking online with many engagement inducing AI or artificial intelligence tools and augmented reality tools as well, would make this field an interesting one to watch in the coming months.
We may have become adept at buying grocery online, but are we ready to buy a home online? Many believe that if we can now go our entire lives without actually seeing paper proof of the money we have earned and invested, we may also be able to enjoy properties that we do not set foot in. The new optimistic approach in the real estate field seems to be a virtual one and the markets as well the government policies seem ready to play!