Impact of Coronavirus on Indian Real Estate-March-2020

The Indian real estate industry has been affected as new launches have been put at bay, site visits have dipped and construction activities have come to a grinding halt as allied businesses such as steel, heavy machinery and other raw. The outbreak has created a great deal of uncertainty regarding trade and imports, not only in China but worldwide. The real estate industry is also not spared. The traders and property agent are wary of visiting mainland China and are sceptical of reduced production in the coming months. This will have a direct bearing on the prices of steel and other articles used in the construction industry in India.

How is Coronavirus affecting commercial and retail real estate in India?
While India has so far been less affected by the Novel Coronavirus as compared to East Asia, the virus is spreading like fire in the country. As far as the real estate segment is concerned, experts strongly opine that it would impact the industry indirectly, as the country is heavily dependent on imports from China We also have multiple hotels that are witnessing increased cancellation by parties. In April alone, we had several bookings, but the majority of these are under cancellation as of now.”

What will be the impact of the Coronavirus outbreak on REITs?
Recent reports suggest that the fallout from the COVID-19 virus outbreak is expected to be a hurdle for planned investment and fundraising activities through REITs this year. Any planned or proposed fundraising exercises through REITs would be put on the back burner for the duration that the pandemic sustains.

“The effects of the shutdown are beginning to be felt by the real estate investment sector. I am apprehensive about the targets being met by all concerned stakeholders. On the positive side, I am confident that at the end of this, we will see an upward increase in the fundraising activity.”The pandemic could also prove to be a wet blanket over the sentiments of investors towards the REIT sector, as a whole. Some analysts suggest that large-scale calamity could lead to occasional positive disruption in earnings for pioneering REITs such as the ones proposed to be established this year

Why may REIT fundraising suffer from the pandemic?
The first upcoming hurdle arises with the Government declaring that it would charge a tax on any profits  flowing into the coffers of the shareholders, investors of infrastructure and REITs. This dividend amount was thus, so far, non-taxable. Secondly, there are key meetings regarding crucial decision making around real estate investments that require representatives to be physically available to ensure credibility to the investors. Physical gatherings have been put on hold by corporates across the country. Thirdly, every stakeholder is taking a calculated look at the events that would unfold from the pandemic and their impact on the global economy and commercial real estate before taking any irreversible investment routes. This wait-and-watch approach is bound to cause delays in the timelines of planned fundraising exercises as commercial real estate deals would hang in limbo.

Has the Government issued any breathers for REITs?
The Securities and Exchange Board of India (SEBI)- the capital market regulator, offered temporary relaxations in compliance requirements for REITs in the wake of the pandemic. In favor of this initiative, the due date for regulatory filings and compliances for the financial quarter ending March 31 has been extended by one month over and above the timelines.

What is the impact on real estate stocks?
If analysts are to be believed, the Coronavirus pandemic has swept almost one-third of the global market cap (capitalization). Markets across the world are crashing, and ripple effects are being felt across the globe. If we talk about the US market, the Dow Jones fell by nearly 12.9 percent, fearing COVID-19 pandemic and ensuing recession. It was the lowest since the Black Friday of 1987.

Real estate bigwigs such as DLF, Mahindra Life spaces, Reliance Infra have lost a significant share of their market cap, sending the overall stock market in a state of panic.The sad news is that the trend is expected to stay, and further losses are expected.

Conclusively, for an even worse impact than previously thought. With the threat of infection affecting human lives, the real estate sector is already seeing a decline in property visits and buyer interest. However, the world has faced similar outbreaks such as SARS virus, bird flu, etc. in the past two and has successfully recovered. Every calamity is an opportunity to scale new heights. Indian real estate and allied manufacturing industries must find positivity in the scenario and benefit by increasing production and indigenous innovation. The government would do well to stop further proliferation of the virus and handhold the industry in the times of crisis. The real estate agents in central Delhi and other cities are affected very much



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