The residential real estate sector in India is facing tough times as customer inquiries and walk-ins have slumped, hit by subdued buyer sentiment. Developers say they expect recovery to be long-drawn-out, which could take months.
Last year, the reduction in stamp duty in Maharashtra, coupled with heavy discounts and offers, led to a sharp surge in residential sales despite the Covid-19 pandemic. However, the second wave of the pandemic, which was far more brutal and affected a larger number of people, has dented sentiments severely, developers have said.
While the industry is still assessing the impact in terms of fall in sales, walk-ins and inquiries are next to nil, and people who had earlier shown interest are now postponing buying decisions.
A survey of 5,000 developers from 217 cities conducted by the Confederation of Real Estate Developers’ Associations of India (Credai) found that 98% of developers are facing reduced customer inquiries, and 42% are experiencing a 75% decline in customer inquiries. Furthermore, the second wave has caused 95% of customers to postpone their purchase decisions.
Harsh Vardhan Patodia, president, Credai National, said, “The second wave has had a more debilitating impact on the real estate sector than the first wave, and added factors such as the recent spike in [prices of] construction material, including steel and cement, have contributed to an over 10% increase in construction cost for more than 88% developers.”
Financial constraints and a liquidity crunch are further adding to the problem, with 77% developers experiencing issues in servicing existing loans, 85% facing disruptions in planned collection, and 69% facing issues in disbursement of customer home loans, the survey said.
Boman Irani, president-elect, Credai National, said, “The second wave hit fast, hard and it hit home. Our walk-ins have completely gone down. Our customers who were looking at buying bigger houses and were willing to invest are now postponing buying decisions.”
Irani said though business has not come to a complete halt and customers will come back, the interim period is critical for developers, who will require sops from government and support from financial institutions to get through it.
Satish Magar, chairman, Credai, said since lockdown restrictions are being lifted in phases, people are still sceptical about visiting sites. “Unless people are able to see and feel the products again, sales are not going to pick up, and it is going to take some time,” he said.
Credai is seeking a stamp duty waiver or reduction to help increase demand, input tax credit on GST and others to improve financial viability of projects, and loan restructuring to aid in alleviating financial constraints. The association is also seeking single window clearance for all projects, commencement of work to expedite project completion, and extension of validity of existing approvals by nine months.