Coronavirus has infected lakhs of people and likewise, the land business is not saved. In a crisis, resources and revenues drain faster than expenses. As a result, developers are taking a defensive stance in launching new housing projects.

Resource and income fall faster than expenditures in a crisis. As a result, developers take a defensive approach to the implementation of new housing projects. The slow-balisation of economies under COVID-19 pretext has immobilized citizens, frozen funds thus arresting industry growth. It has adversely affected credit distribution and asset prices thereby depressing capital flow across sectors. The resilience of the sector is put through a litmus test in times even banks and financial institutions are under twin-pressure recovery while offering credit relaxations.

The Indian real estate sector has a cause to rejoice as Ministry Of Finance, declared the first tranche of the economic package of government. The new package, which is approximately 10% of India’s GDP, also includes the previous Rs 1.7 Lakh Crore announced in March 2020 along with other initiatives introduced by India’s Reserve Bank, including liquidity and interest rate reductions. This is a major step that will de-stress developers as construction activities around the country have been halted. Possession maybe delayed for homebuyers by this move, but that was inescapable in any case.

Further, the Government extended the timetable for project completion and registration by six months, offering major relief to real estate developers. Foreign investors have been leaving the Indian markets in recent months due to uncertainty in the global economy. As a result, the prices of assets tend to be deprived. Amid the dark clouds, developers were eagerly awaiting the launch of REITs (Real Estate Investment Trusts), which were scheduled for listing this year at some point. However, the listing is likely to be delayed again under the current circumstances, exacerbating the liquidity woes of developers. To boost liquidity, the RBI needs to lower the repo rate further and mandate banks to pass on these benefits to consumers quickly.

Promoters will be unable to meet project deadlines because many of their workers have returned to their hometowns, and homebuyers will have to wait longer to gain possession.

Government Measures & Impact

The government allowed the invocation of Force Majeure clause during the COVID-19 era, along with an extension of the registration and completion date suo-moto by 6 months for all registered real estate projects expiring on March 25, 2020, to infuse growth into the country’s ailing real estate industry. Although this move may not fully save the industry from the economic shocks it is in, it is likely to provide the real estate industry with resilience and resources to survive and take on the bigger battles that lie ahead as consumer buying power would be severely hit by the pandemic, with real estate dropping low on their priority list.

The real estate industry has been struggling with a sluggish trajectory of development that came to a complete standstill during the pandemic. Supporting real estate players to survive the bear-run, the Ministry of Finance announced a 6-month extension of the suo-moto registration and completion date for all registered projects which expire on or after March 25, 2020. Victory over the Indian economy’s pandemic and reopening remains elusive, but deadline relaxation coupled with liquidity infusions may help the real estate industry see some light at the end of the tunnel.

Moreover, Government decision on the temporary reduction or waiver of GST for the sector alleviate stress on the developers and help homebuyers get timely delivery of homes.

Additional steps were taken by the Reserve Bank of India to help the economy, including a one-year extension to start commercial operations (DCCO) of project loans for real estate projects which are delayed for reasons beyond the control of promoters, are expected to provide relief to the real estate sector. Realty developers expect the steps taken by the RBI to provide the real estate sector with a boost in liquidity and ease the effect of the global pandemic business interruption. The decision by the central bank to reduce the reverse repo rate by 25 basis points and additional liquidity for the National Housing Bank (NHB) would also speed up and promote bank loan flows to the beleaguered sectorin the wake of Covid-19 crisis.

One year’s extension of DCCO will provide relief to non-banking finance companies (NBFCs) and housing finance companies (HFCs) and the sector at large and provides a glimmer of hope to pass on the benefit to the real estate sector. Moreover, NAREDCO should propose the Government to invest in NBFCs and instruct NBFCs to borrow foreign funds which will help in reducing interest rates, however the latter maybe a challenge in light of India’s protectionist FDI and FPI policies.

The effect of COVID-19 flare-up depends on cataclysm’s gravity, degree, and distribution, which is still unknown even today. The government imposed moratorium and corresponding relaxations must be made viable, but developers will be challenged to lift their balance sheets without falling into an abyss of liquidation, bankruptcy, and vicious litigation. Relief programs designed to boost the economy supply-side would force developers to take major haircuts in sale prices, delay possession and completion of property development, struggle with labour retention and in turn grapple to stay afloat in a cash-strapped economy.


Eventually, the real estate industry should embrace new technologies and reduce their construction cost which will help the sector to generate more demand and sell inventory at a low cost. It is positive, praiseworthy, and in favor of boosting the financial system and the Indian real estate sector at the same time. This will come as a major relief for borrowers and lenders. It also gives elbow room, as the sector slowly restarts its operations in lockdown with the anticipated gradual ease. This will help to smooth operations because they will have to deal with issues related to sufficient labor availability due to reverse migration and supply chain problems about the timely availability of key raw materials such as cement, steel, etc. The liquidity support for NBFCs and HFCs and the extension of RERA project timelines would provide some relief to the sector, but more concrete announcements were still awaited to resolve demand challenges. However, the Real estate industry also hopefully expecting from the government providing additional some tax benefits for home loans which will support the demand for housing and help to achieve the government’s objective of ‘Housing for All’.