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.
The COVID-19 pandemic has disrupted the real estate market in India, including the residential market which was on a recovery path till a few months ago and showed resilience amidst the challenging economic conditions. In fact, sales of residential units in 2019 across the top seven markets had recorded a growth of 6% y-o-y, and in view of the expected improvement in homebuyers’ confidence because of structural changes, 2020 looked very promising.
However, the pandemic disrupted the residential market in March, because of which walk-ins reduced by 50% before coming to a halt post-lockdown. Homebuyers deferred purchase decisions, resulting in a 30% decline in sales in the Q1 of 2020, according to JLL Research.
In the short-term, developers will focus on restarting their construction activities and offloading unsold inventory. According to top developers surveyed in the 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 JLL report points out.
In the last decade, India’s real estate sector has experienced several disruptions led by technology and changing preferences. “However, these disruptions have only expanded the gamut of real estate offerings while redefining the way we live and work. On one hand, consolidation of the residential market is likely to further gain momentum with strong emphasis on credibility and financial strength and on the other, de-densification and splitting up of offices are likely to gain centre stage,” says Ramesh Nair, CEO & Country Head, India, JLL.
“We are seeing fast-paced adoption of technology and artificial intelligence and these are most likely to be the new catalysts of growth in the next normal. The focus on health, sustainability and wellness is also seeing a renewed vigour and is becoming the leitmotif across asset classes,” he adds.
Thus, 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 that require last mile funding in the short term.