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

India’s lockdown to control the spread of Covid-19 has taken a heavy toll on the economy, and one of the worst-hit sectors is real estate, the country’s second-largest employer after agriculture.

Property consultancy firm Anarock reported that home sales during the April-June period will plunge an estimated 81% because construction and marketing activities have been stalled due to the lockdown, Press Trust of India reports.

After surveying seven major cities (Delhi, Mumbai, Pune, Bangalore, Hyderabad, Chennai and Kolkata), Anarock said in a report that only 12,740 units were sold during the three-month period, as against 68,600 units in the year-ago quarter.

New launches suffered an even bigger fall of 98% to only 1,390 units as against nearly 69,000 units in the corresponding period of 2019. Anarock has observed that the lockdown has forced many developers to adopt new technology and strengthen their digital sales capabilities.

The report says housing sales in Delhi are expected to fall 83% during the April-June period, Mumbai (83%), Bangalore (77%), Pune (79%), Hyderabad (85%), Chennai (84%) and Kolkata (79%).

Apart from the disruption of construction and sales activity, the industry is also facing a shortage of raw materials due to the disruption of supply chains during the lockdown. Experts believe that even after the lockdown is lifted it will take months for the material and labor supply to stabilize.

With widespread cessation of economic activity, salary cuts and job losses, people are avoiding discretionary purchases, and at this juncture many don’t want to commit to the long-term payment of monthly instalments on housing loans.

The real estate sector was denied any relief when the Narendra Modi government recently announced a relief package for various sectors. In fact, during a recent webinar with builders, Commerce Minister Piyush Goyal advised them to start selling unsold property at low prices, since waiting for the market to improve would be futile.

Prominent banker Uday Kotak was also of the opinion that the real estate industry must clear its inventory, pointing out that cutting prices would likely bring home-buyers back into the market.

In April, Deepak Parekh, who heads India largest mortgage lender, Housing Development Finance Corporation, said real estate prices could correct by as much as 20% in the near future. The National Real Estate Development Council had estimated a correction of 10-15%.

With many people currently working from home and major companies like Tata Consultancy Services and State Bank of India forecasting that a high percentage of their employees will continue to work remotely, the housing preferences of buyers may change. They may move out of city centers, opting for satellite towns where they can find cheaper rentals and more spacious houses.