Real Estate Industry to Come Back Stronger after the Pandemic

Industry Outlook Team

In an interaction with The Industry Outlook, Yash Miglani, MD, Migsun Group explains the impact of pandemic on the real estate sector and how developers are addressing the challenges thereof.

How do you see the current evolution of real estate sector in light of the pandemic? How do you assess its impact on the revival of growth of the real estate sector?

Most of the reputed developers understood the gravity of the situation and took steps to minimize the impact. The pandemic made all of us understand the power of digital media and the impact that it can have on sales. Earlier spend on digital was much less but now it is around 40-50 percent of the total ad spend. During the lockdown, we clocked in a good number of inquiries only because of our active presence on digital media. This evolution will help the sector in the long run too. Migsun Group made sales of over 500 units with a value of over Rs 252 crores during the lockdown between March 25th and 3rd June. The revival of the sector depends on many factors, however, the role of digital media cannot be ruled out. The sector has also become more transparent with the progress of projects being uploaded on websites, e-tours being made available, etc. The sector has been working on transparency where RERA played a major role, but transparency reached newer levels when the pandemic hit the world.

The growing credit risk among developers is compelling banks to pull the plug on real estate lending. How do you see this change? How can the lending sentiment be replenished?

We have been voicing concern over the liquidity crunch for quite some time. The government announced funds last year but much has not been achieved as it is still unused. Banks have to put the real estate sector on the priority lending list so that the infrastructure development should not come to halt. Once, the NBFCs and HFCs start showing trust in the reputed developers, the problem will be solved. There are checks and balances that can be put to ensure the safety of the funds being given to real estate sector. With RERA, the fear of the lending agencies should fade as non-serious players have already been weeded out. We hope the situation improves as so much is at stake with real estate struggling because this sector is the second-largest employer in the country. We also expect the government to restructure the terms of interest and instalments of old loans given to the developers.

Real Estate Investment Trusts (REIT) have shown a ray of hope for attracting more investment towards the real estate sector. How fruitful do you think it has been so far?

REITs are catching the fancy of investors as the first six months of 2020 saw huge investment by mutual funds in REITs. The growing popularity of this new investment instrument is an indication that the sentiment is improving in real estate. The reasons behind this trust of investors are low-interest rates and a rise in NRIs buying properties. There has been a consolidation of portfolios and good quality offices exchanging hands. However, the pandemic has slowed down the process as many foreign investors are observing the latest trends in commercial property. The signs are good and soon we will see owners of many commercial properties prepare for the listing.

Dealing with an unsold inventory of residential units specifically under-construction projects has become a challenge for real estate developers. What is going to be the way forward for developers?

For well-located and well-planned projects there never was a problem. The huge figures are not the reflection of the real picture as percentage-wise for various regions the unsold inventory of ready stocks accounts for 10-20 percent of total unsold stock. The major part of unsold stock is stuck projects or projects that were facing financial difficulties. The Government has to chip in so that these stuck projects are delivered. The funds announced for stuck projects should be released as soon as possible. The authorities should take a call on these projects at the earliest, and the possibilities of giving these projects to financially strong developers should also be explored without delay.

In what ways has the Covid-19 stimulus package helped the real estate industry sustain itself during the pandemic?

Apart from the allocation towards agricultural infrastructure and social infrastructure, there was no stimulus package given to the real estate sector. However, we have been demanding for a relief package that will help the sector in coming out of the pandemic shock. The government recently announced Rs 19000 crore for NBFCs, which might indirectly help the sector if these institutions extend loans to the sector.

How are new are technologies like AR/VR going to help the real estate industry in its imminent transformation? How should the developers adapt to the changing dynamics of operations?

AR/VR will help the realtors conduct virtual tours, which will give real life experience to the buyers. In fact, many realtors started using these technologies during the lockdown, which garnered good response from the buyers. Realtors increased communication with their prospective buyers through digital channels like emails, WhatsApp, SMS, and social media platforms such as Facebook, Instagram. We have always been quite active on all the digital platforms and have been continuously focusing on sales generated via online queries. There was an upsurge among the buyers to own a home in a group housing project as people were able to see the positives of a Group Housing during the lockdown. In the last couple of weeks, we have made bookings from people who had the liquidity but were short of ideas to invest.

How do you see the future of real estate sector in the post-pandemic era?

The post-pandemic real estate sector will emerge as a more mature market with the developers and the buyers knowing how they want the projects to shape up. The new Age demands have also made it clear that living in gated communities is going to be the preferred option for the people. The growth of the sector will be more profound as the demand is likely to increase manifold with the entry of fence-sitters coming out to get hold of a real estate asset owing to all-time low-interest rates and subdued prices in the market.