Impact of COVID-19 on the real estate sector

Impact of COVID-19 on the real estate sector

COVID-19, a  wordplay for coronavirus disease of 2019.  As declared by the World Health Organization dated 11 March 2019, a single virus can completely destroy the whole race of mankind from our motherly earth. Though it was originated in China, unlike any other Chinese product it has been proven to be long-lasting because it can be easily mutated from one individual to other and thus can impact along with a wide range of population within a short period, which is quite evident from the fact which occurred in China, Italy and America as well.

Its symptoms include fever, tiredness, dry cough and one can also suffer from breathing problems as well. In other words, we can say that this virus does not like people coming closer to each other because it spreads between two people during close contact, either through coughing, sneezing, or talking.  It is an airborne disease. The small droplets produced by the above-mentioned activities will eventually fall onto either ground or any kind of surfaces over a long distance as well and as soon an individual comes in contact with that particular surface, it gets contaminated. The life span of this virus is quite large i.e. it can survive up to 72 hours long. The symptoms may be appeared in the first three days or later but within 14 days of the infection.

The story began from Hubei province in China on 17 November 2019, when a 55-year-old individual was affected by this deadly disease. It was considered to be a case of pneumonia without an identifiable cause. In few days only the doctors over there realize that among the first 31 cases, most were either workers or any individual who has direct contact with Human Seafood Wholesale Market, where they caught, kept, and sold several species of wild animals. Eventually, On December 31, health officials of China informed WHO about the outbreak of a vertebrate-to-human transmitted infectious disease. Hence, there started a lockdown of all national markets over there. Soon, WHO announced on January 7 that it was a novel coronavirus. Soon it traveled to many other countries and becomes the person-to-person transmitted disease. Today the USA is the most affected country followed by Italy, Spain, and China, etc.

Industry before Covid19-

Before this epidemic, India’s nominal GDP growth rate was estimated at 12% in 2019-2020.  The position of India was retained as the third largest startup base in the world. The year 2019 has faced several ups and downs in the Real Estate Sector. Because of the ongoing NBFC crisis which eventually results in squeezing of liquidity and slow pace of recovery in sales. But, the successfully launching of India’s First Real Estate Investment Trust (REIT) opened new ways for approaching crisis issues. Hence it was a balanced year who had kept a lot of advancements for the next year.

Effect of COVID-19 on the Real Estate industry-

The national shutdown in a developing country like India has stopped all businesses and hence economic growth has been halted over. In this epidemic, people are first concerned about their lives and henceforth the demand for commercial real estate would get reduced. As in 2019, there was a struggle to overcome liquidity crisis and structural changes, the cash flow gaps and liquidity has increased as there is a reduction in new sales and residential demands would decrease due to the pandemic. All the major transactions have been canceled, there is no convenient transportation for moving of raw materials and goods. Since all the roads are already empty, and all the construction works have already been stopped, there is a significant change in financial structure and real estate growth patterns. Small companies are even facing a problem of survival. Because of this immediately slow down in economies, a fight for land, raw materials, and capital can be foreseen in the future because of limited clients and customers. It will more widely affect the middle class who are about to buy or sell any kind of property because in such a hazardous situation it is not possible for everyone to continue their secondary needs as well. Fulfilling the primary needs, the already saved financial assets has become the utmost important for everyone because of the closure of the business.

Sales have drastically decreased and opportunities have also reduced because roaming out is not easy like before. Work from home is not as fruitful as going to an office and working over there. Not only because of the formal environment but has also affected productivity as well. Because of shifting and this house arrest, many people have eventually lost their job. it has mostly affected the daily workers who get wages regularly, the emigrants who from their native moved to a new city for earning more.

Hence revenue declined, Cash inflow decreased. Demands increase but supply decrease hence the graph of equilibrium will get shifted towards left as supply will not be equal to demand. Consecutively prices will increase as for a particular product there will be more buyers as compared to the seller. It will directly affect the purchasing power of the client as the purchasing power will decrease and sellers will tend to have more and more profit.

The post-COVID-19 scenario will be pathetic if the prices continue to grow like this and people lost their jobs. The vicious circle of poverty will continue to grow and grasp more and more individuals and countries into it.