Post lockdown, the real estate sector would possibly experience a retrenchment due to the credit crunch. Sales would possibly drop from 4 lakh units of 2019-20 to 2.8 lakh-3 lakh units in 2020-21. This is likely to happen in the top seven cities, as mentioned in the most recent report by KPMG. All this is because of the COVID-19. Unresponsive demand and liquidity pressures would persist. This would surely slow down sales in the undersized and medium term.
With lockdown easements across India, the situation is nowhere near to normalization. The pandemic has impacted the residential real estate drastically. India’s real estate sector is assessed to face losses of as much as Rs 76 lakh crore by the last part of the current financial year (2020-21). Over the next one year, the real estate sector will have to come flooding back with new developments, expansions, and investments. The worst part is we cannot even anticipate the time frame of how long this will last.
COVID-19 Impact Felt in Indian Real Estate
Residential sector needs time to get back
The residential assets would necessitate more time to get back on track. Furthermore, it needs to work extensively to achieve the required sales speed. In the short term, revival is going to be tedious. Consequently, this could intensify the already negative sentiments toward asset classes. The major area of concern is, however, that the residential sector. This is primarily because the purchasing of residential properties will be delayed. Most importantly, the proceeds of the sales will be put into the construction costs. The liquidity crisis in the sector is already been in a thorny state for a while. Now it is just going to add to the consequence of the virulent virus affect.
Co-working spaces to suffer due to COVID-19
Up till now, the co-working space was in huge demand. However, members voiced that there is a concern regarding sanitation and wellbeing in co-working spaces. After the lockdown, there would possibly be a drop off in the demand for co-working spaces. Besides most of the companies have put work from home into practice because of the lockdown. If this works fine, many businesses would adapt to the remote office model.
Office Sector
Majority of the offices are already closed owing to the 21-day lockdown initiated by the Government. It has become difficult for business owners to pay the rent and meet the terms of other lease covenants. Amidst the severe situation, the businesses that have rented office spaces are literally struggling. Most of the business owners have started expressing their helplessness to pay commercial rentals to the developers.
The bang of COVID-19 is expected to keep the real estate prices stagnant for the next few years. Once people are back to normal income and there is a mount in inflation; the situation can get better. An improved affordability can only give rise to the real estate market. The major concern for all at the moment is when would Indian real estate sector recover?
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