Rebooting Real Estate – It’s not just about adapting to the Post Covid-19, scenario but Reinventing the Industry

The worldwide spread of Covid-19 pandemic has stalled all economic activity across the country – barring a few essential services. For the Indian realty market – the second largest employer in the country, the impact of the pandemic is a double whammy.

The last few years have been challenging for the real estate industry, especially the residential segment. Project delays, low demand, regulatory changes have been plaguing the industry in the last couple of years. Now, adding to these woes is the economic and health impacts brought by the Corona pandemic. The quantum of the Corona impact on the real estate industry will depend on several factors like – how long the lockdown will last nationally and in hot spots, whether there will be a second wave of lockdowns later if the virus resurges, and how long will it take for the economy to get back on track. 

There are no definite answers. Industry experts believe that the situation may lead to a recession, similar to the last one we saw in 2008, or even worse. Here, I outline the three issues that the industry is currently facing and why the industry needs to "reinvent" itself to the post-Covid-19 world, instead of bouncing back with temporary solutions that do not offer any long-term benefits.

Let’s take a closer look at the major challenges facing the industry currently.

Labour Troubles & Accommodating Labourers in the post Covid-19 Scenario

One of the biggest dilemmas facing real estate construction companies is whether to retain the employees on their payroll, when there is no construction activity. If not, whether employees who have migrated to their hometowns will come back, once the lockdown is relaxed.

The president of the National Real Estate Development Council, Niranjan Hiranandani states that not all labourers have gone back to their homes. A vast majority of construction workers are still stuck at construction sites. Instead of continuing to keep them in lockdown mode, construction companies should figure out ways to reintroduce them back to their jobs in a safe manner, maintaining social distancing and other precautions.

The need of the hour is to get construction workers back to work to avoid major economic losses and to prevent stoppage of work. One of the main reasons why most workers are unable to return to work is trains are stopped and state borders have been sealed. The industry should work together to organise special buses and trains to ferry workers back to sites.

Going forward, construction companies must make it a priority to provide spacious and clean accommodations for labourers either on-site or somewhere nearby. Even after the lockdown is over, social distancing is a must and that is not possible when labourers are cooped together in cramped quarters.

Financial Impact

Industry insiders predict that even well-funded projects may run into delays of several months. For others, the delays are much worse and can even extend up to a few years. Around 4.66 lakh units that were planned to be completed in 2020 face a severe risk of delays. Additionally, residential sales which have already dipped in 2019 (around 2.60 lakh units) are sure to fall further this year. Furthermore, new launches may be pushed back or even dropped completely.

Now, that we’ve seen the various challenges faced by the industry, let’s take a look at the road ahead.

The Road Ahead for Real Estate Stakeholders

Adapt for Behavioural Changes that will outlive the crisis

In a span of few weeks, our lives have changed in unimaginable ways. People no longer meet, eat out, go out to shop or work. Socialisation has come to a standstill. The working world has rapidly transformed from offices to living rooms, with schools, colleges and offices going online.

Social distancing has directly impacted how people interact and inhabit physical space. This will lead to long-lasting changes on how we view private and public spaces. For instance, the open-plan layouts of commercial offices will need a drastic reversal. Additionally, public health officials will amend building codes to prevent the outbreak of future pandemics.

The breadth and depth of the economic impact of the Corona pandemic on the real-estate industry is yet to be measured. However, we can state with surety that it has led to significant behavioural changes. Irrespective of how the situation unfolds, one this is for sure – the post Covid-19 world will never be the same. This will leave a lasting impact on real-estate assets. Real estate players will have to take immediate action, while keeping an eye on the future.

Earn the Trust, Respect, and Loyalty of Both Employees and Customers during the time of crisis

Real-estate operators have to assure the health and safety of employees as well as customers in all the projects they undertake. The first step is communication. Communicate clearly with your customers and employees. Be open with them regarding the challenges you are facing, the measures you have taken and the plans for the future. Remember that the trust and loyalty you build during this crisis will go a long way in protecting your relationships with customers and employees in the future.

Centralise Cash Management

The real estate industry is always decentralised when it comes to cash management. Major decisions that impact cash flow are done at the property level. Given the uncertainty of the crisis, top management should centralise cash management decisions. Adopt lean practices and try to eliminate inefficiencies at each level.

Taking the Digital Leap

Even before the Covid-19 Crisis, the real estate industry in India had been moving towards Digitisation. Going forward, digitisation will no longer be optional but become mandatory for all real-estate players to provide customers with the best experiences. Companies that have invested in digital sales will see huge returns now. With digital sales, customers and tenants will quickly be able to find the right spaces without physically visiting the space.

Digitisation will help real estate companies offer a differentiated experience like – contactless access for residents, maintenance and housekeeping staff, concierge services, on-demand delivery, virtual communities, and much more.

Companies that lead the way in digital services will enjoy enhanced dividends in the form of superior customer loyalty, new revenue streams and other benefits.

Let’s Start Rethinking the Future of Real Estate Now

Like the global financial Crisis of 2008, this time, this time too, it may hit the real-estate industry quite hard, companies that adapt and reinvent will flourish, while others that are resistant to change will fade. By acting smartly and quickly with an eye on both immediate challenges and long-term changes, the real-industry will surely emerge victorious from the current crisis, while reinventing itself.