Real estate is one of the most battered of the lot in India in the wake of the Covid-19 outbreak. The economic slump stretching over a decade compounded by faulty economic policies by the Centre such as demonetisation and a rushed-through GST had already taken a heavy toll on the housing sector. The Covid-19 crushed whatever little hope was left for the industry. The economic recession had silenced the real estate boom over the last decade leading to a demand slump, while the pandemic has delivered a knockout punch.
In a country like India, home to a massive upwardly mobile middle-class population, real estate has long provided a big platform for employment. The sector saw a lot of traction following economic liberalisation and fast urbanisation happening across the country. Even as a lot still remains to be done for the sector in terms of easing the regulatory framework, the government, nevertheless, has introduced in phases some policy initiatives to help propel the housing sector. However, the pandemic has triggered massive uncertainties in the economy resulting in loss of millions of jobs. People across the country left their workplaces for homes creating a huge shortage of manpower. The Covid-19 forced private companies to trim their workforce and reduce salaries of the leftover staff. The fast spread of Covid-19 and the current pick-up in infections has aggravated the miseries and desperation of people.
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The pandemic could not have come at a worse time for India’s real estate sector. Many aspiring home-buyers were on the verge of making purchases when an avalanche of uncertainties struck them, pushing many onto the fence of indecision. The fact that the pandemic has hit the urban pockets relatively harder, has made the housing sector one of the biggest casualties of Covid-19. The Rs 20 lakh crore economic package unveiled by the Centre and parallel easing in repo rate by the Reserve Bank of India (RBI) have failed to revive sentiments in the country. Lack of demand coupled with record unemployment in the country has combined to emerge as the biggest hurdle for the housing market now. Revival of the sector is heavily contingent on a pickup in the economy which cannot happen overnight. What the government should do to alleviate the situations? Increasing tax benefits for home buyers and incentivizing banks to extend home loans are not just enough.
The Alternative Investment Fund launched by the government in the middle of the pandemic to help builders complete stuck projects is a step in the right direction. But that is not enough. Giving industry status to real estate can help the sector become more organised and transparent. This will also help developers reduce their capital cost and pass on the benefits to home-buyers. Removing red-tape besetting the sector is also another measure before the government. At present, developers have to deal with multiple government agencies for project approvals. There should be a single window system for project clearance. Developers should also be allowed to put their properties on rent for regular accrued income, and not just capital sales approach. From buyers’ perspective also, it makes sense to opt for rental accommodation rather than purchase a house. Developers should be encouraged to adopt technologies to minimize cost and pass on the benefit to customers. Lack of liquidity is a big hurdle for developers. The government may look at the possibility of lowering GST rates. Reduction or abolition of stamp duty or its inclusion under GST can also boost sentiments. This is high time the government did a reality check to boost the sagging housing sector.
