The Coronavirus crisis has jolted the very fabric of the Indian economy, once poised to be the world’s second-largest one. The resultant slowdown in the real estate sector, being the second largest job provider, is mercilessly affecting the fragile construction workers at the bottom rung. With the Coronavirus in the background, let us analyze the rehabilitative measures taken and their sufficiency in the current scenario.
Wealth erosion for wealthy realty
A hawkish eye on the realty sector shows various leakages with regards to property tax collection pan India. The lacklustre apparatus, minimal collection efficiency, and flawed valuations lead to the divulgence of the funds which could otherwise have been well utilised for strengthening the market. Over the top, defaults and disputes in payment of property taxes are cosmic for ages. The outstanding amount of taxes due to pending disputes if cumulated can reinforce the industry immediately. Given the current downfall in the market, the wealth erosion, if not mended soon, could lead to an inconceivable amount of losses till the time the market recovers from the aftershocks.
The doctrine of rent suspension
The disruptions brought in by the pandemic has led to all enterprises to scamper to cash reserves, reduction in payouts trying to minimalize rental payments. The active endeavor of tenants has been to secure way-outs to lawfully evade rental payouts for the entire duration of several versions of the enforced lockdown. To analyze on the legal front, rent suspension can only be afforded in cases where there has been deliberate dispossession caused to the tenant but not being limited to the premise. Additionally, examining judicial response, calling aid from force majeure clauses in the COVID 19 situation might not be of much help considering the vehement contemplation of the contract in the instant case. While tenants look for a way out to ease the burden for rental payments, a legal remedy for avoiding the same does not look much plausible.
The urgent need for RERA corrections
In recent horizon, the real estate industry has been doomed. While market regulators like SEBI and RBI have been seen to actively mitigate the distress caused due to the COVID crisis, the RERA has failed to at the least, gauze a direction for easing the situation. Builders, leaving homebuyers at their plight have ingeniously manipulated the authority to bid outcomes in their favor. The need for digitization in contemporary times has become beyond essential. The incomplete website, rare and scattered project information and regulatory lethargy are the cherries on the cake, making it more difficult for homebuyers to make way for an efficacious remedy. The alibi of lack of powers is a bizarre argument from a regulatory body vested with statutory force failing to implement basic provisions. The homebuyers’ community has been left in disdain and deceit being left at the mercy of the bungling regulator.
Final nail in the coffin of realty industry
With the end of the moratorium period nearing soon, the realty market fears the impending doom that might dawn upon. Currently, the moratorium is only provided to banks and NBFCs; capital market instruments availed no benefits. The liquidity and funding challenges could worsen hereafter, as the demand side pressure is expected to intensify owing to the economic fallout. The demand quotient being currently bleak, the persistent worry remains to be demand revival to rejuvenate the industry. Consumer end demand is likely to show a further nemesis owing to the slowdown of the economy. The recent interest cuts would do barely little to bolster demand soon.
Drop in housing sales: phenomena in a decade
The dent in new launches, indefinitely deferred projects and the persisting slowdown aggravating at a steady pace depicts a further gloomy picture for the realty market. Reliance on heavy loans has already led to a credit crunch in the system with the RBI measures not helping as much. In the back of the lockdown and the liquidity crisis, the fall in housing sales seems to be an obvious phenomenon. With the major cities being worst hit by the pandemic, the vanquishing of housing demands become even steeper. In the absence of a robust demand recovery proposal, the revival of the industry happens to be far from reality.