Uncompleted residential apartments in Greater Noida, near New Delhi. Photo: AFP

India’s ongoing Covid-19 lockdown poses serious challenges for the country’s real estate sector. Promoters will be unable meet project deadlines because many of their workers have returned to their hometowns, and home buyers will have to wait longer to gain possession.

A survey by property consultants Knight Frank shows that the sentiment in the real estate industry touched an all-time low in March. As per the Real Estate Sentiment Index Q1 2020 Survey, both the current and future index sentiments have fallen to the pessimistic zone, Business Standard reports.

More than 60% of property developers and lenders have opined that the Covid-19 pandemic will impact new residential project launches, sales and prices in the next six months.

As for commercial property builders, the survey found that 42% of respondents believe that the next six months will be one of the worst periods ever in terms of new supply being added across the major office markets. About 53% of the stakeholders surveyed said leasing activity will remain well below par in the next six months.

The realty sector had showed signs of a possible revival during the October-December quarter of 2019, when the government had announced incentives for stalled housing projects. A “special window” was established to provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing sector. But the Covid-19 crisis has dimmed hopes for a turnaround.

The industry is also facing a shortage of raw materials as the current lockdown has disrupted supply lines. This coupled with labour shortage is expected to delay projects by six months to one year. Experts believe that even after the lockdown is lifted it will take at least six months for the material and labour supply to stabilize.

This will affect profitability and sales, as buyers will prefer completed or near-complete units. This adverse impact on inflows is expected to affect real estate developers’ ability to execute projects.

As Covid-19 has also affected the economy globally, job losses and salary cuts have become prevalent across most sectors. This has forced people to avoid discretionary purchases and many don’t want to pay monthly instalments on housing loans for years.

In many places this is also leading to a fall in sales and a rising inventory of unsold houses and apartments. Experts believe this could even lead to a fall in property prices.