Today, India is in a precarious position, with the ground situation changing every hour, as it is trying it’s best to contain the Stage-2 of the COVID-19 or Coronavirus pandemic. Given the huge population of India, the low permeability and uneven spread of healthcare systems and the logistical impossibility for India to enforce mass quarantine, it would require a huge collective effort to tackle this challenge. Although India has somehow miraculously delayed the onset of the Stage-3, the future looks uncertain on where the pandemic will lead India to.
As for the situation in the State of Gujarat, we have been able to limit the positive cases below 40 because of various steps taken by the State Government leading to early detection of positive cases and social distancing for one and all. There has been a lockdown practically for every major sector or industry barring those dealing with day to day essentials. Real Estate, one of the major sectors / industry in Gujarat has also taken a hit with the lockdown. All the local and State level Government Offices are closed from 21st March onwards and no transactions towards buy/sell of land / property are happening across the State. This will continue till the lockdown is in place and even further till normalcy returns in the market and economy.
On the economic front, the stock markets took a huge tumble worldwide including India. With the Sensex and Nifty dropping to record lows, the stock market is in turmoil. The Indian Government has, in line with various international governments, announced a financial support package to tackle the aftermaths of this pandemic, however it is premature to estimate the effects of this package. Following a series of measures that were announced, the end of Financial Year 2019-20 has effectively been pushed to June 30.
The three-month period provided by the Central government from the beginning of April till the end of June will give a breather to real estate firms to properly analyze their balance sheets and put in place a robust blueprint for the year ahead in order to help tackle financial setbacks suffered on account of the pandemic. The season during which the virus has hit India presents a few factors in itself which might work in favour of the real estate industry and help it to sail through this difficult phase. New investments and projects are seldom announced during the closing of any financial year. As per the general trend which has been displayed over the years, there is a marked decrease in bookings of properties by end users. Bookings generally pick up after the end of June when the festive season begins and continues thereafter till the end of the year. Fortunately, Covid-19 has hit India during a period which coincides with the few months of diminished business activity in the real estate sector.
For end users, these three months might however just prove to be the best time to invest in properties, if at all there is a fall in prices, instead of waiting for the festive season later when there is definitely going to be a spike in rates.
The optimistic scenario is that unlike in the earlier economic slowdowns / recessions, once the virus is contained and immunity starts to take hold in the population, even though supply chains will take some time to re-engage, it may not feel like the cold start that followed the housing and mortgage crash. The cycle could look like a “V,” or possibly more of a narrow “U,” with a sharp drop but also a strong upswing, coming at some time in the second half of this year.
The silver lining for real estate companies? Yes, as happened at the bottom of the housing crash, real estate investors with a long view will find opportunities to pick up assets at distressed prices, and with financing rates lower than most of us have seen till now. Such investors should be starting to do their research (in identifying the assets) and careful due diligence during this slack period.
All this may change with the big question is on how India fares in the coming fortnight in its fight against the virus. As the World decides to wait and watch, the onus lies heavily on India to contain its outbreak and get back to normalcy sooner rather than later.
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