COVID-19 is a humanitarian challenge that has forever changed the way we live and perceive the world. Being at the forefront of this disruption, the real estate business took a severe blow in many different ways. Depending on the region and class, the crisis unleashed critical liquidity pressure on the market. Hence, the industry is prompted to reflect, reassess and rethink business strategies to gear up for the new normal.
All stakeholders, including developers, tenants, property owners, along with other sub-sectors like hospitality, retail etc., faced immediate backlash. At the same time, office and industrial chains were impacted in the long run with low transaction volumes and increasing work from home culture.
Long term impact on real-estate
Being the fifth largest economy globally, India is a significant contributor to global economic growth. Hence, India’s COVID induced bottlenecks for infrastructure threatens not only its own economy but that of the world.
The post-COVID reality is not just bound to change the developers’ strategies and homebuyers preferences, but also usher in a new dawn in the Indian real estate sector. Earlier, the real estate fundamentals were going strong; leasing activity, capital availability, and firm leverage ratios indicated steady growth. However, today, developers might face a prolonged state of weak liquidity, cash flow issues, low labour availability and lack of long-term leasing opportunities. The government and businesses collectively need to modify the current retort to the virus and fast-track the road to recovery.
Long term behavioral changes
Real estate developers and other stakeholders will face potential long term effects brought by the pandemic, including large scale technology adoption, changing consumer patterns and more. The demand rate for real estate properties for the short and long term might face a permanent shortage. Lack of business travel, conferencing, and increasing dependency on digital interaction and video conferencing is gaining preference, slashing real estate revenues.
Furthermore, with the rise of eCommerce, online shopping has the potential to put physical stores and malls out of business, which makes up a significant part of the revenue.
Viable solutions to pace up recovery
One thing that the pandemic has taught us is to always be prepared for anything. This has accelerated the need for strategic thinking paired with increased demands for digitisation and deep analytics capabilities.
New-age digital transformation tools and advanced enterprise technologies like internet of things (IoT), ERP, Robotics process automation (RPA), Analytics for decision making & mobility solutions and data science can facilitate tenant churn, enable commercial lease negotiations, prompt asset valuation and increase visibility and productivity. These technologies hold tremendous potential to reduce the recovery time while facilitating business outcomes.
Hence, the post-pandemic world would be an era of digital irreversibility. And the above technologies will play a bigger role in the functional aspect of real estate for sound capital deployment, effective property management, virtual tours etc.
Aspects like changing buyer sentiment, increasing job insecurity amongst people, reducing salaries, plummeting buyer intent and low business volume might have a short term impact on sales and investment. However, digital solutions will accelerate the recovery by saving costs and sustaining growth and building a progressive real estate economy.
The crisis has witnessed corporate, civil society, and government displaying a collective front to tackle the pandemic. This collaboration and innovation will be the key to steering through these unprecedented times, especially for real estate. Enterprises today face the ultimate choice to either embrace technology or risk their survival. Those who haven’t made any investments in technology will have to do it sometime in the near future.
The author is Ashok Wani, Head – Technology & Innovation Highbar Technocrat