What will happen to the Investments which are made in Real Estate during a lockdown?.

Is it the right time to invest in real estate? Will the real estate industry will bounce back after the lockdown the over? Let us know what will happen.

Over the last 50 years, real estate investment has become a very popular investment tool. Though buying and selling things made of brick and mortar, is more complicated than investing in bonds and equities, there are plenty of reasons to invest in real estate. Being a sector with global recognition, the real estate sector has four sub-sectors, commercial, housing, hospitality, and retail. The growth of this sector can be attributed to the growth of corporate environments. This, in turn, results in the demand for office space, industrial space, along with urban and semi-urban accommodations. 

As per estimates, by 2040, the real estate market in India was supposed to grow to Rs 65, 000 crores from Rs 12, 000 crores, presently. But, will this be a true picture after the breaking out of COVID-19, the worst pandemic of the century? What will happen to the already floating investments?

The nationwide lockdown for 21 days, amid the spread of coronavirus, has made people stop and think again about housing investment. Some points of concern are:

  • Housing sales are almost zero. This will have an adverse effect on the cash flow of the builders which in turn will result in defaulting repayment of bank loans.

  • The developers may stick onto the rates of the apartment, while the prices in the resale or the secondary market could fall.

  • CREDAI President Satish Magar has confirmed that the lockdown will have great effects on new launches and sales transactions.

Restrictions to movement, a deeply uncertain financial market and apprehensions about future income are all by-products of this pandemic. Real estate activities have slowed down a lot. Let us have a look into the future of the already invested money.

  • The market experts predict an effect on demand and supply of retail and office spaces. The real estate economy will see pressure on rental values.

  • The retailers and the corporates, whether domestic or global, will be bound to delay their decisions on fresh leases.

  • The commercial market in the real estate sector will witness re-negotiations of the already existing rentals. They will also face rent waivers from the landlords.

  • Many customers will also start defaulting on the payment of their installments. These all will be due to the impending tough economic conditions. The developers will be the ones who will be affected as they will have to juggle between their debts, as well as, cash inflows.

  • Many prospective home buyers will think of postponing their decisions on an already launched project. They would either prefer staying away from the project sites or expect a price correction.

Again, expert comments are also showing us a ray of hope. Sales are definitely impacted but not the real estate price. Real estate is believed to have a good turnaround, as soon as the situation turns favorable.