COVID-19: What Homebuyers Should Know About The Property Market

As the world economy comes to a screeching halt due to the Coronavirus pandemic, it is a difficult time for homebuyers and investors, to think about real estate investment. With a looming job crisis and uncertainty regarding the future, for those who have already invested in real estate in the past few months, this is the time to stay informed about the property market and your investment. Here are a few things that you should know about the property market:

*Project delays are unavoidable

Housing projects which were scheduled to be delivered in March and April 2020, will be delayed, as the Prime Minister has announced an extension of the three-week lockdown till May 3, 2020, across India. While the ministries are open, all private companies and construction firms have been shut for this time period. The supply chain will remain affected, because of this prolonged shutdown period.

*No litigations possible

As all legal platforms including the apex court, National Consumer Dispute Redressal Commission (NCDRC) and lower courts are only hearing extremely urgent matters, there are limited chances that any housing project-related case will be picked up during this tenure.

*No new insolvency/bankruptcy pleas

The finance minister has announced that the threshold for default under the Insolvency and Bankruptcy Code has been increased to Rs 1 crore from Rs 1 lakh. There are high chances now that Sections 7, 9 and 10 of the Code will be suspended for a period of six months. This means, any financial, operational creditors and lenders including homebuyers, will not be able to file fresh insolvency petitions against the developer, if the project is delayed.

For cases already with the insolvency bench, the National Company Law Tribunal is picking up only extremely urgent cases. This also means that till May 3, there will be no judgement on most of the real estate cases pending with the NCLT.

*No manpower for help

If you were planning to move to your new home after the lockdown, you might have to wait a little longer, as most of the migrant workers have gone back to their hometowns and even when the lockdown ends, it might take a little longer to get everything back in place. If you were planning to move during the lockdown, it will be impossible to do so, as only essential services are available during this time period. 

* EMI holiday of 3 months

The RBI has announced a three-month moratorium period for all EMI payments. That means bank will charge no penalty for three months, in case of delay in EMI payments. Also, the non-payment will not result in your loan being termed as a non-performing one. If you are not able to make the payment, because of liquidity issues for the time being, it will not affect your credit score, as well.

*Negotiations are on

While this is a temporary period when buying has almost stalled, because of restrictions, tech companies are making use of virtual reality and augmented reality to lure tech-savvy homebuyers. Builders are open for negotiations right now and are offering refundable booking amount deals, as they look to resume cash flows as soon as possible. This could be a perfect time for you to buy if you have spare cash to spend and a contingency fund to support your needs for the next six months. Also, there are chances that property prices will go back to pre-pandemic period once the lockdown ends, as investors would like to exit the market which will boost the supply but there will more buyers looking to invest when there is certainty regarding finances.

Ready to move	Under-construction
Investment possible only if you have visited the site before the lockdown	Expect project delays, because of liquidity concerns in the market, lack of construction workers and shortage of supply material.
Cannot sign the sale deed, agreement or any document which requires physical appearance.	You won’t be eligible for EMI moratorium if your loan is approved after March 1, 2020.
You will have to pay down-payment right now which will take at least a week to get realised.	Can book the unit right now by viewing digital tours and opting for refundable deal.
Won’t be able to move, in the near future due to pending finishing work. That means, you might have to pay rent, as well as EMI for the next few months.	Home loan rates are at the lowest right now. You may get the benefit of reduced repo rates.

 

What investors should know?

If you are in process of purchasing a new property or real estate asset for investment or end-use, you should make a wise choice between ready-to-move-in and under-construction properties. While project delays are imminent and unavoidable, you should have a realistic approach to it. If you are buying a ready-to-move-in property, you have to know that renting it out may not be possible in the near future. So, the monthly bank loan instalments will go out of your pocket.