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Is Gujarat Real Estate back to its pre-COVID phase?

Is Gujarat Real Estate back to its pre-COVID phase?

Experts are seeing a strong recovery in the real estate sector from the festive season.

 

There is no hiding the fact that the year 2020 has been less than favorable to the Indian economy. The travel restrictions and lockdown with the fluctuating economy trends dampened buyers' sentiment across industries. One of the industries to suffer a severe blow in the first quarters of the 2020-21 financial year is the Indian Real Estate Industry. The uncertainty around the Coronavirus pandemic gave a pause to many people who were planning to buy a house or invest in real estate in general. As these months are usually the months that set the trend, the real estate industry suffered quite a blow.

Effect of Coronavirus and Indian Real Estate Industry

 

The Indian real estate industry was in a volatile state even before the pandemic struck the country. The government and RBI had enacted several provisions to improve buyer sentiments like the reduction in interest rates, higher tax rebates for housing loans, and many other schemes. The growth boost that would have come because of these schemes got halted due to the COVID-19 outbreak.

 

The real estate sector relies on the purchasing power of the people and a healthy working class economy to flourish. With office spaces closing to facilitate work from home and many companies downsizing to prepare for a reduction in profit margins, the purchasing power was in troubled water in the March-June period of 2020.

 

Leading developers like Hiranandani saw a total lack of site visits and very few purchase discussions across the country.

 

On the flip side of it, the work-from-home scenario also made everyone realize the need for a stable, spacious, and quality house. The migrant population across India staying in rental accommodations came to realize the need to invest in homeownership and live in a spacious, gated, and secure dwelling. Many of them are finding it hard to work from home from their current accommodations.

 

The Gujarat Real Estate Industry

The Gujarat Real Estate industry has been a stable and self-sufficient industry for the last 4-5 years. Income opportunities, fastest-growing GDP, and good buyer sentiment have allowed the industry to grow steadily year on year.

 

With the introduction of GST, RERA, and other regulatory bodies, developers were playing it cautiously, and this resulted in a reduction in launches from 2018-19 to 2019-20. The launch of commercial projects also went down.

Covid-19 Impact on Gujarat Real Estate Industry

 

While this industry was preparing for a revived first quarter in 2020-21, the pandemic halted construction, registration, and sales as well. After the lockdown announcement, most migrant laborers moved back which impacted the progress of construction heavily. Even though the state of Gujarat has manufacturers of all construction materials, lockdown did have an impact on the supply chain. Stalled projects in turn affected buyer sentiment.

Real Estate Recovery in Gujarat

 

There are three indicators of health for every real estate industry: launches, sales, and registrations (stamp duty collection by the government). The months of September and October saw an upward trend in the collection of taxes and stamp duty by the government indicating the onset of a recovery in the state. The government is said to have collected 1271 crores in stamp duty and registration fees in September-October; surprisingly, 84 crores more than the collection in 2019 these months.

 

The onset of festive seasons and relaxation of lockdowns amidst renewed industrial activity is bringing the lost business to the table again. It could also be attributed to the reduction in housing loan interest to 6.7% by RBI.

 

Expert opinion and market trends show us that the sales and registration that were in the pipeline since the post-GST and RERA period finally materialized after a delay due to the COVID-19 pandemic. The Gujarat CREDAI body has also requested the government to lower the stamp duty by 2% as in Maharashtra to boost buyer sentiment and close the 2020-21 last quarter on a high. That will also improve revenue collection for the government.

 

On the construction front, the real estate sector is also seeing good progress due to the return of migrant labor and industrial production resumption.

 

Summary

 

The COVID-19 pandemic had a severe impact on the already troubled real estate sector in 2020. The real estate industry that was expecting a strong year is slowly seeing recovery signs in Gujarat due to the stamp duty and registration fee collection touching 2019 records. However, owing to the slow months at the beginning of the year, the Gujarat State Government is expecting a loss of close to 8400 crores this year.

 

The government’s intervention to stimulate local economies and lower the stamp duty can accelerate the growth in this industry helping the developers and small businesses scrape by without suffering huge losses.

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