With the unavailability of labor, the cost of construction of houses will increase due to increase in the cost of labor and the cost of materials will increase as a result of supply shortage. As most companies and organizations proceed to implement zero contact meetings and any visitors policies, the real estate market is looking towards the future with uncertainty, however, with optimism. It is difficult to think of a business that has not been affected by the Kovid-19 epidemic, but for the Indian real estate sector, the impact of the crisis cannot be properly observed at this point. It is a known fact that the area, particularly the residential segment, is already struggling with project delays, regulatory changes and under-sales for the last few years. How the coronovirus will affect it is a new question on the horizon.
No one can guess where the market is. There is a perception that the residential market will bleed more as the problems of labor, delays, finances and sales will only get worse. The belief is that people will lose jobs and prefer not to take long term loans where they are not confident about the future. Developers may not be able to keep up with current debts and will go bankrupt if the government does not seek relief sooner rather than later. Even labor will not return to the cities as they will feel safe in their villages, which can increase the cost. With the unavailability of labor, the cost of construction of houses will increase due to increase in the cost of labor and the cost of materials will increase as a result of supply shortage.
Other faith people have realized during these difficult times that home is the only safe environment we have. With work increasing from home, people need to make sure they have a good home and the right place. People need to look at homes instead of renting because security is needed. And with the stock market not doing well and the difficulty of predicting the future of companies, people will invest their money in safe investments like real estate.
We are living in a world where predicting the future is like tossing a coin. So how do we decide? According to me, the best way of future is to look at what has happened in China after the lockdown is over. It is interesting to see that retail stores in China started off slow, but came back and saw some changed stuff. The office markets remain stable with many measures to be safe. Residential has been the bouncy market with the purchase of homes by both end users and investors. Homes that are larger and more convenient for work from home options are gaining better traction.
Whether India will follow the same route is not clear at the moment. However, we can expect the best for the real estate segment in the country.
(Ankur Gupta, Joint Managing Director, Ashiana Housing Limited)