The world over is grappling with the effect of the Covid-19 pandemic which has had a devastating impact on the world economy, with global oil prices dropping at an all time low, stock markets crashing, job losses and salary cuts ramping up across all classes of the work force and businesses closing down.

The consequential effect of all these is that economic activity in many sectors including the real estate sector has either slowed down or grinded to halt.

What are the big challenges?

1. Economic experts have advised that it is important to have access to liquidity during crisis such as this, which means a lot of people who invested in properties with the hope of reselling are finding it very challenging as many prospective buyers who had saved up to buy properties are now holding unto their cash and unwilling to tie it down in any property purchase. In other words, there are more properties in the market but very few willing buyers.

2. For those who invested in tenanted properties i.e. properties with existing tenants or those who bought land, built on it and leased it out with the hope of generating passive income from the rents paid by tenants, this might be a very challenging period as most tenants are faced with job losses, salary cuts or loss of income from business inactivity .Many landlords right now are forced to grant rent reliefs which is a major dent on their anticipated investment income.

3. Many of those who invested in event centres with the hope of generating income from its lease are currently counting their losses because of the ban on social gathering. In other words, with no parties, no weddings, no concerts, there are no events to generate returns on investment.

4. With the social distancing rule forcing many employers to ask their employees to work from home, investors in commercial properties with offices are having a hard time leasing their office spaces. Many businesses with plans of expanding and therefore acquiring more office spaces have had to shelve the idea in order to comply with the social distancing and also sustain their businesses.Some start-up businesses with intentions of leasing offices to operate from are having a re-think and operating their businesses from home with the aid of I.T.

5. For those who bought lands and are currently in construction or developmental stage, with the social distancing in place and builders having to observe it, property development will either be put on hold or slow down greatly, which also has its attendant financial implication

6. Real estate developers with instalment payment arrangement with subscribers to their estate are currently faced with many subscribers’ inevitable non-compliance with their scheduled payment plan as a result of the pandemic’s adverse effect on their streams of income. Many subscribers are already in talks with Real Estate Companies to defer payment to a more convenient time and many if, not all will be forced to grant the deferment concession as the request for the deferment is a global phenomenon and everyone is affected one way or the other.

In spite of the dark side which makes the real estate sector appear like an unattractive sector to contemplate at such a time as this, there is a silver lining for the bold investors with foresight which will be the focus of my next post.