A view from India

Covid-19 has created an extraordinary situation for everyone. The Indian Government announced a three-week nationwide lockdown from 25 March, which has since been extended to 4 May. To try and limit an economic slowdown the government announced a gradual exit strategy as of 20 April, where some parts of the economy, including agriculture, logistics, infrastructure, e-commerce have been allowed to return to work in areas where no Covid-19 cases have been detected. 

There has also been a raft of monetary and fiscal support for the economy. The Reserve Bank of India (RBI) implemented a number of measures such as cutting the main repo rate by 75 bps, to 4.40%, and urging banks to offer 3-month moratorium on term loans and working capital loans. The direct fiscal package equates to around 0.8% of GDP and has been aimed at lower-income households such as in-kind and cash transfers to households and wage support to low-wage workers.

Before the outbreak of Covid-19, the Indian economy was already under pressure. In January, forecasters were predicting around 5.5% to 6% growth for 2020, a slight uptick from the seven-year low of 5.3% in 2019. The predicted outlook for the Indian economy for this year now ranges from a contraction of 1% to growth of 3.5%, with the IMF’s forecast in the middle with 2.5% for 2020 and a bounce back of 9.5% in 2021.

Like many other global economies there is a high degree of uncertainty and consumer sentiment is taking a hit. Knight Frank India, together with the Federation of Indian Chambers of Commerce and Industry (FICCI) and the National Real Estate Development Council (NARDECO), undertake a quarterly sentiment survey of consumers. At the outbreak of the global pandemic, the Q1 results already showed the lowest ever sentiment score of 31 (a score above 50 reflects optimism and one below represents pessimism).

After regaining a positive outlook in the preceding quarter, the sentiment for the residential sector dipped across all parameters - new launches, sales volumes and price. More than 60% of the stakeholders believe that the current Covid-19 situation will adversely impact the number of new launches, largely due to construction halting and labour shortages, as well as sales volumes and prices in the coming six months

Before the pandemic, the government had announced a slew of measures to spur residential market activity, such as the Alternate Investment Fund for last mile funding of affordable housing, rationalisation of Goods and Services Tax (GST) rates, liquidity support to housing finance companies and non-banking finance companies (HFCs and NBFCs). However, with the sharp economic slowdown, these will need to be supplemented with further fiscal and monetary stimulus measures to boost sentiments and demand.