Housing sales to see 25-35% y-o-y fall in 2020; new launches by 25-30% due to Covid 19. Construction delays could run into several months.

By Varun Singh

Housing sales are set to reduce in the country, because of Coronavirus. Covid 19 has impacted the real estate sector adversely.

According to a report by Anarock Property Consultants, COVID-19 will lead to a reduce in Housing Sales by 25-35%, and Office Absorption will fall by 13-30%.

Apart from sales, unsold housing inventory is said to remain stable, may even see 1-3% yearly reduction.

Coronavirus has also impacted the construction of the ongoing projects. Even MahaRERA on Thursday announced three month extension for projects.

The report emphasizes that construction delays could run into several months for well-funded projects. It will be few years for others; 4.66 lakh units to be previously completed by 2020-end face high risk of delays.

Affordable housing target group will be the most affected, because of limited income & unemployment fears, many will defer purchase decisions.

Not only housing but Indian office sector will also see significant impact by COVID-19. Besides demand-supply decline, key occupiers may re-look office space requirements.

Indian retail leasing & new mall completions to see 30-50% dip against previous growth estimates; revenue-sharing model to gain dominance.

According to the report, residential housing sales in 2019 stood at approx. 2.61 lakh units across top 7 cities and may now fall between 1.70 lakh -1.96 lakh units. Likewise, new launches may also witness a 25-30% decline during the same period – from 2.37 lakh units in 2019 to anywhere between 1.66 lakh -1.78 lakh units.

Anuj Puri, Chairman – ANAROCK Property Consultants says, “Besides demand-supply decline in 2020, significant new trends will emerge across segments of Indian real estate. COVID-19 has derailed the office segment’s growth trajectory of last three years. New business models will be tried, making players more reliant on technology for ensuring business continuity. Besides revisiting office requirements, corporates will keep employee health and hygiene of assets as the topmost priority.” 

He further added, “In Indian retail, the revenue-sharing model will become even more dominant. Retailers will prefer to partner with mall owners to mitigate risks arising from declining footfalls amid such unprecedented crises.”

Current estimates indicate office supply will remain between 33-40 mn sq. ft. in 2020 as against nearly 47 mn sq. ft. in 2019 – a reduction of 15-30%. Net office absorption in 2020 is expected to drop to between 28-35 mn sq. ft. from the previous years’ 40 mn sq. ft. – a decline of 13-30%.

Office rentals will be under pressure as occupiers try and re-negotiate terms and cost. To reduce operations cost, telecommuting and rostered timings may become the new norm, depending on the nature of business – thus leading to higher demand for flexible workspaces.

Indian retail sector net leasing is estimated to be between 3.1-4.3 mn sq. ft. in 2020, as against 8.5 mn done in 2019. This means a decline of 49-64%. Meanwhile, new mall completions will be between 4.2-5.9 mn sq. ft.

Pressure on rentals likely to be in the range of 10-15% in 2020 in terms of effective collections from retailers by mall owners.

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