India expects gradual economic recovery by first half of 2021

V Nagarajan

India is emerging from a strict national lockdown, which had led to a sharp economic disruption. Phased re-opening of offices and retail establishments has begun while businesses have commenced manufacturing and construction activities. This, coupled with fiscal and monetary stimulus packages, are expected to drive gradual economic recovery by H1 2021, with full recovery likely by H1 2022.

However, going forward, labour shortage is a challenge that the real estate and manufacturing sectors will have to address, according to a recent survey by Cushman & Wakefield, property consultants.

Faster economic recovery in the US and Europe next year is good news for India’s office market. Given that around 75 per cent of India’s office segment is dependent on transactions by US and European companies, leasing transactions will remain at multi-year lows in 2020. However, with economy recovery taking hold in the US by early next year and considering vaccine trials could be successful by then, Indian office leasing activity is expected to bounce back by Q2-Q3 2021.

The government has announced stimulus to revive the real estate sector. Cut in repo rate to 4 per cent and moratorium on loan EMI payments will provide income support for households. Further, MSMEs definition has been changed to include all entities (including real estate) with investments as low as INR 10 million and turnover up to Rs1 billion.

According to C&W’s survey, office demand is likely to pivot with long-term positive sentiment with speedy recovery in Bengaluru and Hyderabad. There will be a slow start in H1 but momentum may rise in H2.

Demand from large scale consolidation, expansion and setting up of GCCs is likely to come back in 2021 and strongly in 2022. Growth in deep technology, healthcare, pharma and India’s continued strength of talent, experience, favourable real estate costs may drive the tech story.

On the retail front, mall completions may be pushed further by 9-18 months. Rental reduction of 15-20 per cent is likely with superior grade malls to engage with retailers for rent discounts. Major activity in new store openings is unlikely till end-2020.

As regards residential property, income uncertainty and job security will impact purchase decisions. Developers are looking to offload unsold inventory to reduce their widening cash flow gaps leading to price reduction. Deeper discounts such as minimal booking amount, zero pre-EMI offer, price protection, 10-90 developer-backed payment schemes are factors that may lead to a turnaround in the sector.

For logistics and warehousing sector, demand in short-term may face a supply crunch with projects impacted by the lockdown and shortage of materials and labour. New construction may restart now but project completions in 2021 will be aligned to demand.

The hardest hit is hospitality sector with occupancies going to near zero and many hotels are shutting down operations. Unfortunately there has been no financial or stimulus support announced for the industry so far.

I have been living in the Gulf for the past 10 years and inherited agricultural land in Bengaluru. Can I gift this land to my daughter who is also in the Gulf? Please clarify. Narasimha Rao, Sharjah.

Under the FEMA (Foreign Exchange Management Act, 1999), there is no restriction on inheriting agricultural land by an NRI. You may become the owner once you complete all the prescribed formalities as per state laws where the land is located.  As far as gifting the land to your daughter is concerned, you should note that NRIs can gift residential and commercial property including land. As far as agricultural land is concerned, you can gift only to a citizen of India and residing in India.

I took home loan and with the lending rate reduction at all time low, I want to switchover for a better option. What is the lowest home loan option available? Paresh Kapadia, Dubai.

With a fierce competition prevailing among housing finance companies and banks and with the lending rate reductions at all-time low, the timing is just appropriate for a switchover. In fact if you have opted for flexible rate option, the institutions/banks concerned will automatically reduce the lending rate. If you wish to switch, you will have to follow certain ground realities. The lowest rate in the market is 6.7-7.10 per cent. Select banks waive processing fee during switchover. If you are hailing from states like Karnataka, Maharashtra, Tamil Nadu and Rajasthan, then you will have to pay the stamp duty during loan transfer from one bank to another. It can vary between 0.15 per cent and 0.5 per cent of the outstanding loan.