Against the backdrop of construction sector already witnessing credit pressure this fiscal, Covid-19 has emerged as another major challenge for real estate sector and its allied industries. Apart from slowdown in public spending, coupled with weak business sentiment, the construction sector is also facing a double whammy of labour shortage and working capital pressure, resulting in its inability for order execution.
According to CRISIL, slowing construction activities is likely to affect domestic demand and the industry has been struggling with stretched capital cycles. Moreover, non-availability of adequate labour due to outbreak of Covid-19 may result in delayed delivery of residential and commercial real estate projects which will further dampen the entire scenario. Already the consumer sentiment is weak, so it can be easily ascertained that sales in real estate sector in both residential and commercial categories could face severe headwinds.
Given the entire scenario, execution of real estate projects can be derailed in the first quarter of the upcoming fiscal. It is due to non-availability of labour as a result of lockdown, both execution and demand will be adversely impacted.
Steel and Cement, the most important raw materials for building construction, may also face sluggish demand due to lower construction activities. Overall, stoppage of construction activities due to the ongoing lockdown will force the entire real estate sector as well as its allied industries reel under pressure, hence outlook of the industry seems to remain bleak, even in the long run.