The coronavirus spread and nationwide lockdown will possibly hit the supply and demand for housing properties which could witness a 25-35% fall yearly, reveals the latest report by a real estate consultancy firm ANAROCK Property Consultants Pvt. Ltd.
Residential sales in 2019 stood at approximately 2.61 lakh units across the 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.
The 21-day lockdown has brought construction activity to a halt, adding to the troubles of the developers. The report estimates that the project delays could run into several months for well-funded schemes and a couple of years for others.
Around 4.66 lakh units across top markets were slated to be completed in 2020. These projects now face a high risk of delays.
The economic fallout of the lockdown is likely to impact the affordable housing segment to a great extent. With concerns around job losses and salary cuts, customers are likely to put their decision to buy on hold for months. The report estimates a 1-2% rise in unsold stock within this segment in 2020.
Anuj Puri, chairman at ANAROCK, said, “Besides the 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 the 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.”
The impact of commercial real estate is going to be equally severe and detail the growth of the segment – an asset class that has been on an upward journey over the last few years.
The office absorption in 2020 is expected to drop to between 28-35 mn sq. ft. from the previous years’ 40 mn sq. ft, registering a decline of 13-30%. The supply of office space will also get impacted and is estimated to remain between 33-40 mn sq. ft. in 2020 as against nearly 47 mn sq. ft. in 2019, as per the report.
In its report, ANAROCK said office rentals will be under pressure as occupiers will try and renegotiate terms and costs. “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,” it said.
In the retail segment, 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. “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,” the report noted.
