How COVID-19 will impact real estate industry in India

March 18, 2020 4:05 PM

With the number of enquiries slowing down, share market being impacted and generally slow economy, it will impact all the housing segments in the real estate industry.

real estate, real estate in India, COVID-19, coronavirus, impact of COVID-19 on real estate in India, festive seasonMany developers are skeptical and have their reservations around the launch of new projects considering the current situation.

With the onset of the COVID-19 outbreak that has affected the trade and industries worldwide, disruptions in business cycles are bound to impact the demand for commercial as well as residential spaces in the real estate market of India.

The novel disease has moved beyond its point of origin in China’s Hubei province to the rest of the world. The World Health Organization (WHO) has declared this pandemic as a public health emergency of international concern (PHEIC), prompting countries to impose travel restrictions on international travelers. Current advisories restricting travel following concerns over the coronavirus pandemic may lead to delays in decisions on commercial real estate space take-up in the short term, but the long-term impact remains unknown as the longevity of the crisis is uncertain.

The festive season which was expected to see a surge in demand owing to Gudi Padwa, Ugadi, Akshaya Tritiya and Navratri, which are considered to be auspicious occasions for launching new projects and also buying new properties, will not be the same this year. The housing market did witness some traction over the past few quarters but owing to the virus outbreak and other factors like generally slow economy and pressure on liquidity, this trend is about to change.

Many developers are skeptical and have their reservations around the launch of new projects considering the current situation. They would rather focus on completing the existing projects instead. Thus, new project launches are expected to see a fall by 15 to 20 per cent this festive season. There will be a few exceptions of course such as projects which are already in the soft-launch stage and have already seen a fair amount of marketing spend.

Most of the home buyers belong to the working class category and since many prospect buyers will not be too certain about their jobs, it will impact their buying decisions as they may not be able to decide to take the responsibility of an added liability and the burden of EMIs after buying a new property.

In the interim, we can expect some spike in developers opting for digital launches. This will allow customers to request site visits online where they will be given specific time slots to avoid crowding. The government advisory to avoid much social activity is certainly going to impact site visits and thus housing sales as well.

So far if we were to analyze the whole situation, India has been less affected, but if we were to go by the a recent report by CBRE, the impact of the epidemic will slow down the US and Indian economies which could result in delayed decision making, curtailed capital expenditures and thereby slowing down of portfolio decisions. The report also mentioned about the fact that completion timelines of retail mall projects are expected to be delayed as sourcing for fit outs is done majorly from mainland China which will result in lag in projects which are in finishing stages and stores which are at fit-out stages.

With the number of enquiries slowing down, share market being impacted and generally slow economy, it will impact all the housing segments in the real estate industry. There is a silver lining for affordable housing schemes however as demand may continue to exist considering government incentives associated with it.

(By Ankur Jain, CEO, Group Satellite)

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