The Covid-19 pandemic has become the world’s biggest socio-political and economic shock since World War II, a rare disaster, affecting millions, both in terms of health as well as the economic challenges consequent to the series of lockdowns.
Under the assumption that the pandemic, and required containment, will peak in the second quarter for most countries and recede in the second half of the year, the April World Economic Outlook projected global growth in 2020 to fall to -3 per cent. This is a downgrade of 6.3 percentage points from January 2020, making the Great Lockdown the worst recession since the Great Depression, and far worse than the global financial crisis of 2008. In such a scenario, the country needs an infusion of motivation through fiscal measures to rise up and fight its economic battles.
The relief stimulus announced by the Centre on May 12, 2020, extended to industry and individuals through various measures and schemes is, therefore, a welcome and a much-needed step. The various stimuli packages are designed to aid the Indian economy to rise up and march on the road to recovery.
The liquidiy tap
The cash flow relaxation on account of bank guarantees being reduced to cover the pending value of work, and the credit guarantee scheme for NBFCs and HFCs, will prove extremely helpful in providing liquidity flow across the value chain. The special liquidity scheme worth ₹30,000 crore for NBFCs, HFCs and MFIs will bring in much-needed relief to the sector. NBFCs and HFCs are major sources of credit for real estate, as it will ease the liquidity crisis, especially for stressed players.
With respect to the Built Environment (BE) sector specifically, the FM has addressed one of the most pertinent challenges relating to the ambiguity on contractual agreements the sector was struggling with. Stakeholders can rely on force majeure clauses, giving much respite to developers and contractors alike. The extension of the construction period by six months without any cost implications for all government projects will provide relief to the industry. The announcement that government projects under ₹200 crore will be open only for Indian businesses will bring additional opportunities for the Indian players in the BE sector.
Force majeure clauses
All real estate projects registered under the Real Estate Regulatory Authority (RERA) expiring on or after March 25, will get a six-month extension, as the lockdown had stopped all work. The FM has said, “Treat Covid-19 as force majeure under RERA. Extend the registration and completion date, suo motu , by six months for all registered projects expiring on or after March 25 without individual applications. Regulators may extend this for up to three months more, if needed,” she said.
This extension will give a breather and time to the developer fraternity to complete their projects. Additionally, RERAs will be empowered to use these provisions to ensure project completions are enforced within the extended time-frame. The BE should receive more sustenance in the coming months.
In line with the path laid down by the country’s leadership, the way forward for BE is clear ― improved and world-class infrastructure is the requirement as it will be critical in making the nation self-reliant.
On the commercial space side, while there would be some consolidation of office space by the existing large occupants, in the longer run, demand for commercial space is expected to increase in order to build anti-Covid-19 compliant offices.
Increased economic activity post-lockdown is expected to lead to more employment and prosperity in the BE sector leading to all-time higher demand for real estate ― housing, education, healthcare,and entertainment, among others. My personal take on the expected growth in the BE sector and surge in demand for professionals is that by 2030 India will witness the highest demand for real estate and infrastructure job roles globally.
(The writer is Dean & Director, RICS School of Built Environment, Delhi.)