Godrej Properties, one of India’s major property developers, has changed its selling technique over the past few months. With the country under a nationwide lockdown, the developer says it has been forced to adapt and has moved its entire home sales process online. “We have been using video conferencing to engage with prospective home buyers,” says Lalit Makhijani, the chief marketing officer at Mumbai-based Godrej Properties. “This is the first time we have attempted end-to-end digital sales.” But he admits it is not easy to sell homes over the internet, given that “real estate is a business which is high on touch and feel”. India's property sector has been hit hard by the coronavirus pandemic. Work on projects that were under development was suddenly forced to stop as the nationwide lockdown - one of the strictest in the world - came into effect on March 25. In recent weeks, the measures have eased allowing some construction activity to resume in parts of the country. But demand for both residential and commercial property in India remains weak, industry insiders say. “People are either going through job cuts or pay cuts and not everyone is keen to pick up a house,” says Sudarshan Lodha, the co-founder of Strata, a tech-enabled real estate investment platform. “They'll probably want to delay the decision making for another six months or a year. This is going to drain a lot of cash flow for developers, which is going to be very stressful from a real estate point of view.” The office segment is facing its own set of challenges amid the coronavirus pandemic, which have forced companies to put in place remote working procedures. “Many employers are scared and they don't want to open offices because of liabilities if things go wrong,” says Mr Lodha. “Many large companies have told their employees to work from home until September, October. This means that all the new leasing which was supposed to happen over the coming quarter will all be cancelled. With many employees expected to continue working from home even after the lockdown ends, reports suggest that some firms may even consider moving out of prime offices to cut costs. “There are a lot of price corrections which are happening in commercial real estate and rentals are going to get cheaper,” says Mr Lodha. The lockdown has hampered India's economy as a whole. Official gross domestic product data released on Friday for the quarter to the end of March revealed that growth has slowed to 3.1 per cent, compared to 4.7 per cent in the previous quarter. The economy is expected to slow further, as these numbers only include a week of the movement restrictions. Goldman Sachs forecast that India's GDP will contract by 5 per cent in the current financial year, which began in April. India's property sector is a significant part of the country’s economy, contributing up to 6 per cent of GDP, and is the second-largest employer in India after agriculture, according to official figures. But the sector – which was reeling from a liquidity crunch and slowing economic growth - was facing tough times even before the pandemic. This left real estate firms struggling to find funding for projects, pushing many builders out of business. According to property consultancy JLL, the number of active property developers in India's major cities plummeted 36 per cent between October 2018 to March 2019, compared to the previous six months. In recent years, sales have been muted, and residential property prices have declined in cities including Mumbai. Property consultant Knight Frank expects prime residential real estate prices in Mumbai to fall 5 per cent this year and 3 per cent next year. “India’s key markets will be faced with uncertainty, mostly due to a significant erosion of confidence among buyers across the spectrum,” says Shishir Baijal, the chairman and managing director of Knight Frank India. The latest real estate sentiment index by Knight Frank and industry bodies FICCI and NAREDCO reveals that that confidence in the sector in India dropped to an all-time low in the January to March quarter. “The real estate sector that had just about started showing some signs of revival during the last quarter of 2019 has suffered a severe setback due to the Covid-19 crisis,” according to the report on the survey's findings. But some experts say there is a limit on how far prices can drop. “It is naturally assumed that prices are going to fall, but we must remember one thing - that real estate has been under pressure for some time and accordingly prices have already corrected,” says Ramesh Jogani, the managing director of Mumbai-based builder The Real Estate Company. “Any further correction would make it unviable for the developer to finish the construction.” He says that “all cities are affected similarly, but will bounce back once normalcy returns”. The government has also announced a few measures to help the property sector amid the lockdown. These include extending the timelines for completing projects, which would have otherwise seen developers facing penalties. As part of the government's $266 billion (Dh977bn) economic package, the finance ministry included liquidity schemes for financial institutions, which should in turn help developers secure credit. “We believe the structural reforms, liquidity schemes and fiscal support provided by the central bank and Indian government are expected to provide some relief to stressed asset classes of Indian real estate,” says Megha Maan, the senior associate director at property firm Colliers International. The Reserve Bank of India has also delivered two emergency interest rate cuts since the lockdown started, bringing down borrowing costs for homebuyers. “At present times, end users are viewing a home as a physical security and an asset,” says Ashish R. Puravankara, the managing director at Puravankara Limited, an Indian property developer. “After the recent repo rate cut, home loans are at the lowest in many years, and this will certainly attract homebuyers, and aid in an increase in demand. However, with launches of new projects being spaced out, supply will hit the market at a slower pace.” However, buyer sentiment is only one of the problems developers in India are grappling with. “The material supply chain has been disrupted since inter-state travel is restricted and the prices of cement and other materials have skyrocketed,” says Mr Puravankara. Another problem is an impeding labour shortage. Left without work, many migrant labourers have fled India's big cities to return to their home towns and villages. “Being a labour intensive industry, it is early days and we will have to also assess what future impact the reverse migration will have,” says Mr Puravankara. He explains that the company had to be swift to adapt and has been focusing its attention on using online platforms. The company is also planning “e-launches” for its luxury housing projects. “For the first time in India, a real estate product is been launched in a fashion similar to the automotive or the mobile phone industries,” he says. But given the challenges the real estate sector is facing, many stakeholders say more needs to be done from the top. “This is for the first time that the industry stands united,” says Mr Jogani. “Various bodies of real estate have come together under a common umbrella, have identified problems, addressed them and are making a common approach for intervention by necessary authorities.” He says these include “demands like one-time restructuring of loans, a decrease in interest for housing, additional loans available for the sector and a reduction of stamp duty”. Given the uncertainty ahead, it will be key for the industry to adjust quickly to the circumstances. “There is significant adoption of new technology,” says Mr Makhijani. “From the way marketing is done to the construction processes, to the apartment designs, a lot of changes will be seen in the sector.”
