Real Estate & Covid-19

To sustain, we must collaborate, as that is the new formula to growth, writes Vijay B Pawar, Founder & Managing Director, Mirador Group of Companies.

The real estate was already going through most difficult times after demonetization & GST, post both election i.e Central and State, we were expecting some kind of reform in the sector along with some old packages from central government for us. Covid-19 came like a storm and before we can understand everything is standstill, not only us but the whole world. All the expert in industries is saying that the impact will be huge on the world economy, including India.  

Affordable housing segment where we belong to, We have mixed feeling about the same. The most important thing after health shelters and I feel people after being quarantine for almost a couple of months now has understood it. Most middle-class people are thinking about buying their own homes now. The question is, will the economic slowdown allow them to do so? The world is saying that we are heading towards a global economic crisis. If this impacts the jobs of people, especially, middle and lower-middle-class people in India, which is the mass, then the situation will be worst.

We as a company, India when it comes to buying home are very thoughtful, buying a home is a full family decision, not like other sectors where people do shopping on their own. We see all the angle, think future, commuting, school, market, medical facilities, and budget. We have never thought about buying homes online. (though now most of the middle class and lower middle class of India is buying maximum things online.) Buying a home online is a distant reality for (especially first home). Thought we always had this book online option on our website, but that was only limited to taking tokens and confirming bookings. Real sales happen on the field and on-site when it comes to first home buyers. But now post Covid -19, things may change, it has already started changing.

Challenges

The sites are completely closed due to lock down and there is a lot of panic in construction site labor's reading uncertainty of the future. The agricultural crop year in India is from July to June. In view of the Indian cropping season, most of labour's have started going back to their native places and take crops till the uncertainty is stabilized and I personally think that this will go on till December 2020, or till the drug for Covid is found, whichever is earlier.

The industry is currently standstill, labours are uncertain and most of them are awaiting lockdown opening to move to their homes. Most of the labourers in the construction industry are from UP/Bihar and Kolkatta and Odisha. They work in seasons and go back to the village in rotation. After this epidemic, the picture will be different, the feedback I have taken from labour's working for us is very different. They want to spend time with their family now, they want to pursue working on the farm until this issue settles in the metro city.  I wonder what will happen to the industry if all workers start thinking in this way? There will be a huge labor shortage in Mumbai or across the industry. So even if the lockdown is over, we will have problems starting work, due to labour. That is from the manpower point, now what about sales? People I feel will be very careful while spending money, there can be a change of behaviour in terms of their spending pattern, as everything will change. People will cut off all expenditures, there might be job cuts; we are clearly heading towards a global recession. Hence improvement in sales is difficult.

Policies and Reform from the Government

That's the most crucial thing, where the government has to step in. There have to be clear policies and relaxation in income tax to a common man has to be given. For real estate, I feel big corporate developers always have access to policymakers, but what about the MSME sector, the policymakers shall think about the MSME sector, which is the largest employment generator and also contribute to local employment generation. The small developers, especially working in the sector of affordable housing needs support from government  and bank. Pre- Covid also, the fact remains that due to economical slow down banks were very conservative in sanctioning home loans for affordable home buyers. The loan amount upper CAP was 80% of the flat cost, so for example if a buyer wants to purchase home worth 30 lakh rupees, he should have a minimum of 6 lakh rupees in his saving to buy 30 Lakh home. Now Imagine, a household, whose income is Rs. 60000 PM, can they have 6 lakh as savings? They are qualified, their CIBIL is good, what they don't have is down payment, hence they cannot buy home. Hence their loan is rejected.

RBI and Bank have to come up with something where buyers are funded with a 100% flat cost.  At the developer's end, they have to come up with a policy where it is mandatory for banks to funds all projects, in a certain way and following special guidelines issued by RBI. This will be a tremendous help to MSME.  Hon'ble Nirmala Sitaraman has announced Real Estate funds as a reform for the sector, it has to still reach to developers in the MSME sector, who needs it the most.

CSR and Labor Reform

CSR has to be mandatory for big corporates to deliver, in fact, out of 2%, the government shall make it compulsory to give 1% to respective states where they are functioning as Covid funds. Labor reform is a very complex subject as it is completely depending on behavioural change post Covid. As of now, all state government is looking after labours well and coming up with various schemes to support them. To sum it up, Post Covid, we are looking at complete changes, a new world. What worked before Covid, may not work post Covid. Customer behaviour may change drastically, patter and priorities may change drastically. We are looking at a scenario that was never experienced by any living person in this era, hence only time will tell, but what we can do as humans are to stay positive and face it with an open mind and heart. Last but most important suggestion is, to sustain, we must collaborate, as that is the new formula to growth. In time to come, we have to sustain first, then grow, hence the best way to do it is to collaborate, earn less but earn for sure. Help each other to sustain and then grow. Let's grow together and let's build together as we say at Mirador!

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