Landlords and developers aren’t showing trends in favour of rental deferment or discounts says a report by an international property consultancy firm.
By Varun Singh
Many had expected that the landlords and developers may defer rent for the lockdown period.
However, a report by JLL, an international property consultancy firm, says that landlords aren’t in favour of deferring rents.
The report states that developers and landlords are looking at Common Area Maintenance (CAM) charges discount or waivers. But sadly not in favour of rental deferment.
“Top developers surveyed in the office sector, many are looking at Common Area Maintenance (CAM) charges discount or waivers. This has emerged as a significant trend where landlords / developers are either agreeing or reviewing the same with occupiers. Having said that, it is important to note here that there are no visible trends in favour of rental deferment / rental discount until now across the top seven cities,” read the report.
The lockdown because of the COVID 19 pandemic has had severe impact on the real estate industry.
The office market saw its net absorption fall by 30% i.e. to 8.6 million sq. ft. in Q1 2020, states the report.
Expansion plans of many companies paused resulting from deferred deals, while real estate strategies shifted to re-negotiations of contracts and delaying fit outs.
“In the short-term, re-negotiation of contracts between landlords and occupiers is the underlying trend in the office real estate market,” says the report.
“While lockdowns were a necessary intervention to limit the spread of the virus and save human lives, the cost to the Indian economy cannot be underestimated. While the office sector is expected to lead the recovery cycle, the green shoots of recovery in residential real estate will be in tandem with overall economic growth and improvement in the current fragile employment scenario. Institutional investors are expected to assess the progress in each sector and are likely to focus on asset management and support projects for their last mile funding in the short term,” says Samantak Das Chief Economist and Head – Research and REIS, JLL.
In the medium to long-term, occupiers and developers will re-evaluate their strategies. Office demand will remain robust in the medium to long-term.
“The office market fundamentals are strong – with low vacancy, stable rental growth and limited upcoming supply. It is expected to recover the fastest once the outbreak is under control,” the report adds.
Due to the pandemic, homebuyers have deferred purchase decisions, resulting in a 30% sales decline in Q1 2020. In the short-term, developers are expected to focus on restarting their construction activities and offloading unsold inventory.
According to top developers surveyed in residential sector, there are indications of price rationalization in Delhi NCR, Bengaluru, Chennai and Kolkata. Construction activities are expected to gradually resume nationwide and in major cities, projects are resuming.
“Residential market’s revival hinges on intensity and duration of the pandemic. As consumer sentiments improve post the lockdown period, sales in the affordable and mid segments are expected to show initial green shoots of recovery towards the end of 2020, with the onset of the festive season,” the report points out.
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