Lockdown Impact: Housing sales to drop by 25-35%; Players to rely more on technology

Current estimates reveal a substantial drop in demand and supply across various real estate segments in 2020.

coronavirus real estate

ANAROCK’s latest report ‘COVID-19 – Will it Reset Indian Real Estate?According to the study, no sector will remain immune to the impact of the coronavirus, which has shaken up industries across the globe and forced them to consider immediate, mid-term and long-term ways to re-strategize and rethink their businesses and business models.

Real Estate industry too is impacted. Here are some of the highlights that report reveals:
  • Housing sales to see 25-35 per cent y-o-y fall in 2020
  • New launches will fall by 25-30 per cent.
  • Unsold housing inventory to remain stable, may even see 1-3 per cent yearly reduction.
  • Construction delays could run into several months for well-funded projects, few years for others.
  • 4.66 lakh units to be previously completed by 2020-end may face high risk of delays.
  • Affordable housing target group most affected, limited income & unemployment fears to defer purchase decisions
  • Indian office sector to see significant impact by COVID-19; besides demand-supply decline, key occupiers to re-look office space requirements
  • Indian retail leasing and new mall completions to see 30-50 per cent dip against previous growth estimates; revenue-sharing model to gain dominance
  • Technology to gain significant precedence in Indian real estate from 2020 onwards
COVID-19 Impact on Housing Sector

Current estimates reveal a substantial drop in demand and supply across various real estate segments in 2020. Housing sales could witness a 25-35 per cent yearly drop in 2020 against the preceding year, reveals the ANAROCK report COVID-19 – Will it Reset Indian Real Estate?’

Residential 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 per cent decline during the same period – from 2.37 lakh units in 2019 to anywhere between 1.66 lakh -1.78 lakh units.

Unsold inventory in 2020 will largely remain stable, with single-digit annual decline of around 1-3 per cent. The nationwide lockdown has completely halted construction activity – project delays could run into several months for well-funded projects, and a couple of years for others. Nearly 4.66 lakh units across the top 7 cities earlier slated for completion in 2020 now face a high risk of delays.

The affordable housing segment, which gained significant traction over the last few years, may also take a hit by COVID-19. The outbreak will significantly affect affordable housing’s target audience. With limited income and unemployment fears, buyers of affordable housing may defer purchase decisions, leading to an estimated 1-2 per cent rise in unsold stock within this segment in 2020.

Anuj Puri, Chairman – ANAROCK Property Consultants said: “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.

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,” he added.

COVID-19 Impact on Office and Retail Sectors:

The report also analyses the impact of COVID-19 on India’s once-booming commercial office and retail space sectors, and the changing trends therein. For instance:

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 per cent. 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 per cent.

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 per cent to 64 per cent. 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 per cent in 2020 in terms of effective collections from retailers by mall owners.


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