Real estate faces a challenging scenario

The Confederation of Real Estate Developers’ Associations of India (CREDAI) has released the findings of its first ever industry survey conducted across the North, East, West and South zones between 24 May and 3 June 2021, to assess the impact of the second wave of Covid-19 on the real estate sector in the country. Conducted with stratified sampling method, the exploratory survey witnessed a first-of-its-kind extensive participation of 4,813 developers from 217 Indian cities, providing crucial insights on the industry sentiment and the range of challenges faced by the real estate sector.

According to the survey report, over 95 per cent of developers feel inevitable project delays, if no urgent relief measures are injected in the sector by the government and the 

RBI. These delays are attributed to a range of factors, with 92 per cent developers experiencing labour shortage at sites, while 83 per cent developers are working with less than half the workforce, and over 82 per cent of developers are facing project approval-related delays.

“The real estate sector has showed tremendous resilience in bouncing back on a cautious recovery path post the first wave, despite little relief measures,” affirms Harsh Vardhan Patodia, president, CREDAI National. “However, the second wave has prompted us to reflect and re-evaluate the growth path of the industry and we felt it was vital to assess the challenges faced by the customers and industry partners in light of the recent developments. The findings reveal that the second wave has had a more debilitating impact on the real estate sector than the first wave”.

Added factors such as the recent spike in construction materials, including steel, cement, etc, have contributed to more than 10 per cent increase in construction cost, feel more than 88 per cent of the developers. Various financial constraints and liquidity crunch are further adding to the problem, with 77 per cent developers experiencing issues in servicing of existing loans, 85 per cent developers facing disruptions in planned collection, and 69 per cent facing issues in disbursement of customer home loans.

The survey findings by the apex body of the real estate developers have also put the spotlight on the changing consumer behaviour, resulting in a slowing of demand due to decrease in enquires and site visits. An overwhelming 98 per cent of the developers have been facing reduced customer enquiries, while 42 per cent experienced a 75 per cent decline in customer enquiries. Furthermore, the report reveals that the second wave has caused 95 per cent of the customers to postpone their purchase decisions.

Progressive measures

“We have made a representation to the government citing the current survey and requested it to infuse urgent financial stimulus and initiate quick progressive measures to assist recovery,”  adds Patodia. “As a part of our presentation, we have requested for liquidity infusion, one-time restructuring of loans, six months’ extension of the completion date by RERA across-the-board, a stamp duty reduction or waiver, moratorium extension on principal and interest for six months and freezing of SMA classification for another year. We are hopeful that the government will consider our appeal and make urgent interventions this time”. 

The apex developers’ body also feels that reducing the cost of construction materials, implementing single window clearances for project approvals and work commencement, as also allowing input tax credit for all sectors will help the business. CREDAI deems that continued and adequate policy support to the real estate sector is critical for the revival of the Indian economy, as, it accounts for 6-7 per cent of the GDP, is the second largest employer and is a business generator for over 270 ancillary industries in the country.

It is of the view that the Covid Impact Analysis Report is probably India’s most comprehensive and credible real estate survey, as it comes straight from developers across the nation and projects the ground reality. The impact analysis report will be shared with the concerned ministries and all relevant stakeholders, so that policy makers will get an appropriate perspective of the situation and put forth the much-needed measures to bail the industry out of this difficult condition.