What are the far-reaching effects of the COVID-19 on the real estate sector?.

As we all the effects of the pandemic situation which has caused the entire world to quarantine or lockdown. What has this pandemic has caused an effect on real estate industry? Let’s have a look.

All this while, we have heaved a sigh of relief, when we thought of an investment in real estate. Quite a safe investment, real estate has continued giving 8-10% returns over time. But recessions and some other factors can give us second thoughts. Not even a month back, did we imagine that something called COVID-19, will put to test, this eternal concept of ours. Commercial real estate was expected to reach a robust 60 million square feet this year.  All these have taken a backseat as the decision-makers can no longer visit India, due to the travel restrictions. Investors and homeowners are frantically summarizing and compiling the available reports and figures to estimate the effects, this pandemic is going to have on the real estate sector

It was time when annual real estate reports were about to be published, when something called coronavirus, took the world by storm. 

Wall Street experts and other specialists have already started weighing in the impact of COVID-19, on real estate. Let us have a quick look into the far-reaching effects, the virus might be having on real estate housing.

  • Home prices: It is too soon to predict what will happen to home prices, this year. We can expect a drop in the prices of the homes as a result of the recession, which is likely to follow the pandemic. Late March has already seen a fall in the purchase contracts. There are troubles in the mortgage market and a lack in the interest of the home buyers. Even a shortage of appraisers, real estate brokers and other related professionals is a detrimental factor. Potential changes in constructions and delays have already started concerning people. Though it is still very soon to have a proper figure, renovations and new constructions will receive a major setback.

  • Economic uncertainty: The already committed collections from booked sales will get affected, as mile-stone based payments will defer. Some buyers will delay payments as a result of economic uncertainties. Investment decisions will also go haywire. 

  • Quarantine effects: With potential buyers in compulsory quarantine, in most of the countries, the real estate sector has been standing still since the onset of the pandemic. There are zero site-visits and walk-ins now. Lockdown on non-essential services has slowed down the construction activities.

  • The sudden displacement of migrant workers will halt the construction pace: The sudden displacement of migrant workers due to the lockdown, the force responsible for construction in many areas of India, will have a far-reaching impact. As per a report released by the Centre for Development Studies, the virus will reduce long-distance migration. Industrial areas will remain devoid of labourers for long periods, as some workers may never return at all.

The picture is not that grim yet. Experts suggest that the real estate market will continue to offer good returns, as compared to other asset classes. We can expect to see continued or probably increased capital flow. The 3-month moratorium on EMIs, announced by the RBI, will also provide ample time to come back.