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Impact of Lockdown 2.0 on Real Estate

Posted by Balaji on May 17, 2021
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Over the last few years, the Indian real estate market has become increasingly organized. Though organic growth plays a role in the transformation, a liquidity crisis and the implementation of RERA also play a role. Small and medium-sized developers are finding it increasingly difficult to raise private capital, forcing them to partner with larger players or be acquired by them. RERA has also mandated that developers need to now earmark 70% of their receivables into escrow accounts, which has impacted their funding mechanism even more.   Additionally, the new lockdown 2.0 will further accentuate the situation, thereby forcing more organization into the industry. Strong cash flows, powerful IT & technology bandwidth, and advanced marketing acumen will allow developers and advisories to survive, thrive, and eventually shift towards larger growth trajectories. Smaller developers, on the other hand, will continue to face grim prospects.   Developers will Expand their Market Share real estate The current crisis has disrupted the industry’s otherwise upbeat mood, resulting in a dramatic drop in sales. The turbulence will last for a while until the current medical issues are resolved. This time, we could see a faster recovery because most developers experienced a similar situation in the previous fiscal year and therefore have a recovery strategy at their disposal.   Nonetheless, the revival would favor larger and listed players.   We’ve seen before that, small developers struggled, big players emerged stronger as a result of the crisis. As per the rating agency ICRA.   61%, despite the overall market of real estate, is lower than the pre-COVID levels. Most of the big developers such as Prestige, Sobha, Godrej, Tata Housing, etc. posted higher profits. Similar trends will continue even in the coming time as well.   Investments in Technology will increase real estate The previous year saw a significant increase in technology investments. For a while, Industry leaders have been debating over-investing in technology. However, the industry maintained a demure approach which finally changed the previous year, when the nationwide lockdown was announced.  Following the declaration of the lockdown, realtors, entrepreneurs, and advisories poured money into technology and innovation in order to keep their businesses running smoothly.   Advisories and developers will continue to make significant investments in digitization and technology in the future. The investments will be made with both strategic and organizational goals in mind. Space Planning apps, such as digital walkthroughs, 3D renderings, AR & VR-based applications, and so on, will see significant investment. Similarly, digital marketing investments will increase, and the online platform will gradually cement its status as the primary marketing channel. Increased investments will also be made in developing data analytics-based platforms, predictive models, and other similar technologies. All of this would help the industry to become more organized.

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