The novel coronavirus (Covid-19) outbreak has exacerbated the sad state of affairs in residential real estate, which in the last few years has not just seen lukewarm sales, but also a liquidity crunch. Analysts project that the segment could further witness sales declining by as much as one-third during the current calendar year (CY) compared to 2019.
According to a report by Anarock Property Consultants, the current predicament in the segment on account of the Covid-19 outbreak and the ensuing lockdown will hit housing sales by 25-35% y-o-y during 2020. Apartment sales would be in the range of 1.70-1.96 lakh units. This is against a sale of around 2.61 lakh units in 2019, an annual growth of 5% over 2018.
The residential sector has been grappling with subdued demand for the past few years. In an attempt to stay afloat, developers explored avenues like restricting supply, focussing on execution, reducing unit sizes and developing affordable housing projects. However, the liquidity crisis initiated by the IL&FS fiasco and subsequent fallouts of various financial institutions further impacted the segment, the report explains.
Amid these changing dynamics, private equity (PE) players shifted their attention totally towards commercial assets. As per Anarock Research, residential PE investments’ share of the overall inflows declined from 53% in 2015 to a mere 8% in 2019. The segment attracted inflows of $395 million in 2019 against $265 million in 2018.
“Covid-19 has severely hit residential real estate business and the sector has come to a standstill. With a screeching halt to site visits, discussions, documentation and closures, the early indicators depict that we are likely to face a tough time for the next few quarters and the sector’s recovery has been pushed further away by at least a couple of years,” Anarock chairman, Anuj Puri said.
Besides sales, new launches too would be impacted. “New launches may also witness a 25-30% decline during the same period — from 2.37 lakh units in 2019 to anywhere between 1.66-1.78 lakh units,” Ananrock said. Unsold inventory in 2020 will largely remain stable, with single-digit annual decline of around 1-3%. The unsold inventory at the end of 2019 stood at around 6.40 lakh units.
The real estate consultancy wanted that the nationwide lockdown has completely halted construction activity and 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 seven cities earlier slated for completion in 2020 now face a high risk of delays.