Nations across the world are locking themselves down as their economies suffer while the unprecedented Coronavirus pandemic continues to claim more and more lives. The economic fallout of the outbreak would also result in a 2008-like recession, only a bigger one and more widespread, say experts. While the most important thing right now is to prevent and control community outbreak in a highly populated country like India, buyers or a seller in the real estate sector should brace for some sluggishness even when this is over.
What should home buyers know?
Project delays are imminent
Housing projects which were scheduled to be delivered in March and April will be delayed as the Prime Minister had announced on March 22, 2020, a three-week lockdown across India. While the government organisations are working with limited workforce, all private companies, construction firms have been shut for this time period. Moreover, the construction material which comes from different states and regions is not in stock. There are chances that the supply will become costlier in the near future due to shortage in the market.
Only extremely urgent cases are being picked up
Since the Supreme Court is only hearing the extremely urgent matters, there are less chances of any housing project-related case getting picked up during this tenure. Similarly, other legal platforms such as National Consumer Dispute Redressal Commission (NCDRC) and lower courts have been asked to take the Coronavirus threat seriously and work from home as much as possible.
No new insolvency/bankruptcy pleas
For insolvency related cases, the finance minister has announced that the threshold for default under the Insolvency and Bankruptcy code has been increased to Rs 1 crore from Rs 1 lakh. Also, if the situation remains the same till April 2020, Sections 7, 9 and 10 of the code will be suspended for the period of six months. That means, any financial, operational creditors, lenders including homebuyers won’t be able to file fresh insolvency petitions against the developer if the project is delayed. For cases already with the Insolvency Bench, the National Company Law Tribunal is picking up only extremely urgent cases. This also means that for the next three weeks, there will be no movement on most of the real estate cases pending with NCLT.
You cannot move to your new home right now
So, even if the structure is ready and possession and occupancy certificate is already issued, you cannot move out right now as only essential services will be available during this time period and there is no surety that even after three-weeks, if this could get better or will it be extended.
EMI-holiday of 3 months
The RBI had on March 27, 2020 asked banks to charge no penalty for three months in case of delay in EMI payments. The non-payment will not result in your loan being termed non-performing either. If you are not able to make the payment because of liquidity issues for the time being, there is no need to panic.
Property prices aren’t going to fall or rise
If you are expecting property prices to fall because of less demand or rise due to expensive construction material, you should know there is less scope for the same. While this is a temporary period when the buying is almost stalled because of restrictions, tech companies are making use of virtual reality and augmented reality to make the most of it and luring tech-savvy homebuyers. For investors, this prolonged period of lockdown might affect their liquidity due to which real estate investments will take a hit.
What should investors know?
If you are in the process of purchasing a new property or real estate asset for investment or end-use purpose, you should make a wise choice between ready-to-move-in and under-construction properties. While project delays are imminent and unavoidable, you should have a realistic approach towards it. If you are buying a ready-to-move-in property, you have to know that renting it out may not be possible in the near future. So, the monthly EMI on any home loan, will go out of your savings. Here are more pros and cons of ready-to-move-in and under-construction properties that you should know:
|You will not be able to let out your property in near future, at least till the lockdown is over.||Be realistic and enquire about actual delays in project delivery.|
|You will not be able to register the property, due to the lockdown.||You will not be eligible for the home loan EMI moratorium, if your loan is approved after March 1, 2020.|
|The finishing work (carpentry, furniture, appliance delivery, etc.) can be done only when the lockdown is over. Till then, your money is stuck, if you have paid any advance for the booking.||Under-construction units/projects are at more risk since a liquidity crisis might hit the developer. Moreover, the construction workforce which mostly comprises of migrant workers, have shifted back to villages.|
|If you have invested in a property for self-use, you will not be able to move in, in the near future due to the lockdown, social distancing rules and lack of manpower. This means, you may have to pay rent, as well as EMI for the next few months.||The supply of construction material has been hampered due to the lockdown. This could boost prices in the near future.|
What sellers should know?
Due to the prevailing market conditions, sellers who have put their property in the market have to wait longer to liquidate their asset. Here are few things that you can do for using this period to market your property effectively:
List your property online
Instead of inviting people for property visit, you can simply list your property on online portals where you can give all the requisite details. Property portals have more reach than any individual property brokers. You can publicise your property to more people in a shorter time and only those interested will make an effort to reach out to you.
Create videos of virtual property tour
To give a more detailed view of your property, you can create a video tour of your property. This can be done with a handheld camera or your smartphone camera with a decent picture quality. You can choose to upload this with your property listing or send it to those who are potential leads.
Use video conferencing for meetings
You can e-meet your potential client to discuss further negotiate the deal. Reach out to the people who might be interested in the property and discuss different prospects of buying your property now.
Rent it out
You can also rent out your property for a short time if keeping it vacant is a problem. You can also lend it to people who are in need right now and can use an accommodation till the situation is back to normal. Sellers should remember this is not the time for panic selling. You can choose to take a break from the process and start again once the market improves.