We are already aware of that the outbreak of Covid-19, the global pandemic of the century, is the major reason behind the present global economic slowdown. India is also one of the worst sufferers due to its huge population and the high population density. The global lockdown, the most effective preventive measure of Covid-19, halted the economic activities of the country, causing the economic slowdown.
Both commercial and residential real estate sectors in India are also suffering from the outbreak of the global pandemic. The real estate sector in India was already under stress during the year 2019 due to the credit squeeze, high leverage, rising non-performing assets in the construction finance and also due to the overall economic slowdown. This pandemic too added a jolt towards the growth of this industry. The following figures are showing the recent scenario of the real estate stocks, listed with the Bombay Stock Exchange (BSE), in India.
Figure 1: BSE Realty Index (6 Months) Source: Moneycontrol
Figure 2: BSE Realty Index (3 Months) Source: Moneycontrol
Figure 3: BSE Realty Index (1 Month) Source: Moneycontrol
The indices are considered as the smartest indicators of the economic condition of a country. The above three figures, extracts of the BSE REALTY, are clearly showing the current market status of the real estate stocks in India. The prices of the stocks of the real estate firms hit the rock bottom during this lockdown period. Furthermore, the market moved flat during the last three months. The real estate industry is still a labour intensive industry. The reverse migration of the workers, prompted by the nation-wide lockdown, also affected this labour intensive industry. However, the cut in the policy rates, by the Reserve bank of India, could boost the real estate market. But, lay-offs, pay-cuts and lesser job security of the employees reduced the demand in the housing sector which also added worries to the real estate market.
The market experts are expecting more reduction in the post Covid-19 market scenario. The rating agency India Ratings expects that there will be a decline in the residential real estate market in India. The National Real Estate Development Council (NAREDCO) is also expecting around 10 to 15 percent drop in the real estate market in India. NAREDCO is expecting a loss of around Rs. 1 Lakh Crore in the realty market due to this global pandemic. But, Mr. Deepak Parekh, the Chairman of the mortgage lender Housing Development Finance Corporation (HDFC), is expecting around 20 percent reduction the real estate prices due to the corona virus pandemic and the global lockdown. In fact, government had announced various incentives for affordable housing. But, at that point of time, the outbreak of corona virus pandemic halted the Indian housing market.
But what is next for the real estate industry? Industry experts are not expecting growth in this industry in the near future, i.e., for the next six months to one year. It will certainly take time to go back to its normal flow of activities. In reality, we have to wait till the economic activities catch its’ own path, as it was in the pre-Covid-19 stage. Moreover, India may become a favourite destination of the investor as most of the nations do not prefer China for their controversial role during the global Covid-19 pandemic.
Then what is left for the investors of the real estate stocks? For the stock market investors this is the right time to invest in the real estate stocks as the market is under sluggish condition right now. It is expected that the market will going to be surged after six months or one year. The investors will get their expected return from the stocks, in which they have made their investments, if they hold it for a long term. The investors, who are already holding the stocks under this sector, are suggested to stay invested to get “The Fruit of Patience”.
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