Mumbai: Coronavirus and its subsequent lockdown have brought the real estate sector to a standstill. One business that is hit severely is residential real estate which is expected to witness a decline of 25-35 per cent in 2020, compared to the same period last year. The impact will be felt in the affordable segment too, stated property brokerage firm, Anarock.
In a report published by Anarock, based on understanding trends in seven cities, stated, “In 2020, residential real estate sales are likely to register an annual decline of around 25-35 per cent.” In 2019, the residential sales stood at approximately 2.61 lakh units across the top seven cities and may now fall between 1.70 lakh -1.96 lakh units. This is expected to bring disruption in the market which will lead to a drop of 25-30 per cent in new launches. Likewise, new launches will fall from 2.37 lakh units in 2019 to anywhere between 1.66 lakh -1.78 lakh units.
New launches graph | ANAROCK Research
The report also stated that the affordable housing segment 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,” Anarock report stated.
Data for Top 7 cities only |
Homebuyers are expected to show an interest only during the second half. In addition, the buyers will select from the existing unsold inventory and not opt for projects under construction. Thus, unsold housing inventory will remain stable, and may even see 1-3 per cent yearly reductions.
Unsold inventory graph | ANAROCK Research
On the commercial side as well, 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.
Anuj Puri, Chairman, Anarock Property Consultants 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.” The report highlighted that office rentals will be under pressure as occupiers try to renegotiate. “To reduce operations cost, telecommuting and rostered timings may become the new norm, depending on the nature of business - thus leading to a higher demand for flexible workspaces.”
It was stressed that revenue-sharing arrangements will become dominant. Mall owners’ rental collections are likely to be impacted severely. Significant pressure on rentals from retailers to mall owners can be witnessed. Mall owners will see a drop of 10-15 per cent in 2020 in the rental revenue, it started.
Prior to COVID-19 outbreak, the Indian real estate industry was pegged around USD 650 billion by 2025 and USD 1,000 billion by 2030. This certainly seems tough amidst the current circumstances, the latest report pointed out.
