Covid19 Impact On Real Estate In India

Let us analyze the impact of the CO-VID 19 or also known as corona virus on the Indian real estate sector immediately:

The corona virus seems to already have had an impact on the Indian stock market by eroding a large sum of wealth of the investors, and now real estate sector is no way behind at least with no diminishing asset values but with eroding cash flows which is a big reason to worry. As we speak about this, we all know this pandemic financial effect is temporary, and we are all are curious to know how will this financial impact hurt us.

The interim relief by RBI on the moratorium on the EMI’s has brought in a big relief for borrowers across the country to manage their finances in these tough times. While large corporate & financially healthy companies have been supportive in continuing to pay salaries on time, few SME / MSME have been going through tough times in manage their cash flows due to the current lock down across the nation.

While work from home has been adapted by the skilled employees, real estate sales teams are currently focusing on tele-calling their prospects or enquiries to understand their interest levels or sentiments towards buying a residential property, the outcome seems to be mixed across the country. The construction activity has come to a halt across the country and this has caused a serious issue with the UN skilled workers on ground. The central & state governments have been trying to keep them safe by providing adequate reliefs and measures.

While speaking to a few developers across the country, we also understand that they are trying to support their labors as much as possible with basic facilities like shelter and food. Though this pandemic might end in the next couple of months there is going to be a unknown after math which we may find it tough to think about right now.

While we have been seeing many industry leaders giving their views on the aftermath, we have a few pointers which we’ll only have to wait and watch:

Commercial real estate:

In the last 18 months Commercial real estate have been riding on a high in India, with new increased absorptions, relocations, expansions keeping the demand and supply matching. We have also seen recently that a Private equity firm Blackstone now owns the largest commercial real estate portfolio in India. This sector mainly revolves upon how the USA markets bounce back and their fight against this pandemic will remain crucial. As many of the large occupiers in India are dependent on business from the west or headquarter there. At this moment, the sector has mixed reviews as our developers and property consultants are quoting, the fresh supply of commercial real estate is expected in the next 12-15 months and leasing activity might pickup by then. Though these are testing times the sector may see delay in starting new projects, re negotiation on rental values. My Property Boutique foresees – Over all commercial real estate continues to remains safe with steady growth in the future for investors.

 Retail

As stated above the retail real estate also has been growing at a rapid pace with many new malls launched in metro cities and tier 1, 2 cities in the last 18 months. They have been seeing good absorption rates and higher rental values. Due to CO-VID 19, the offline retail market has been hit badly in the last 1 month with footfalls dropping by over 90%. With the only current antidote of social distancing - malls, cinema theaters and other public places are going to take much more time to open post the lock down. The retailers are going to have a tough time with closed malls, limited footfalls in high streets and managing the rentals, overheads is going to be a challenge from a large retailer to a small retail store. Though there is a lobby formed where tenants are asking for a holiday period on the rentals to the developers or the landlords, the outcome seems to be uncertain at this time. My Property Boutique foresees – Outcome post this pandemic on retail real estate seems uncertain and it might take a few more months post this pandemic to bounce back.

Residential real estate

Residential real estate is the most talked about subject across the country with developers, agents, financial institutions all come to a standstill. The builders are already loaded with huge Unsold inventory. With the current corona outbreak, the home buyers are having no clue on what to do, to stay on rent or to purchase with uncertainty on their jobs. We will break the residential market to three stages of the asset:

Ready to occupy stock – The projects which are fully completed and ready to occupy across the country will have huge pressure to drop the prices. As buyers will go on a wait and watch policy for the initial couple of months post the pandemic, the builders who have completed the project and have invested the money already will look at negative cash flows and will force them to go for a price cut to sell quickly and monetize the asset. This stage of the asset also makes it more attractive to the buyer to invest as its ready to occupy with added advantages likes – No GST, trust issues on the developer is not applicable as its ready to occupy, no rent and pre-emi issues and attractive interest rates now at 7.15%*. It’s a safe bet and a win-win situation for the home buyers to get a good deal.

Under construction projects – Irrespective of the Indian city, currently under construction projects are seeing low velocity in sales every month. Majority of these projects are either bank funded or self funded which is moving towards the end of completion which will keep them in a safe zone. Majority of these projects are due for completion during the mid of 2021.  These developers will hold on to the pricing and home buyers will continue to buy in these projects though there is no price reduction is mainly due to certain factors as location, house size, vasstu etc. So as a home buyer if your still expecting reduction in prices in under construction projects it might not be visible and the projects based on  choice will entice you to book as you may see prices shooting up in the next 12-15 months across real estate asset classes.

New launches - After a lull last 12 months, we were just beginning to see new launches coming up in the initial days of 2020, but this pandemic seems to have put break for new launches. As we work with over 300+ developers we are seeing that lot of new projects are ready to launch which might get delayed for a few months and builders will wait for a positive sentiment. We might see the old pre launch days coming back where agents or property consultants will drive sales in pre launch and based on the traction, launch dates will be planned. A lot of these projects are already planned at a reasonable price lesser than the prevailing rates and don’t see prices which can go below this as it may affect the product finishes later. The new launches will have demand based on consumers with preferred choices of their house types and payment plans from the builders which might attract them. New launch traction and sales velocity will purely depend on the builder track record and profile unlike real estate market and sentiment.

My Property Boutique anticipates the overall residential real estate looks positive though it may face bumpy rides in the next few months it will bounce back strongly attracting home buyer, NRI’s  and investors. There might be good deals in the offering for ready to occupy homes watch out home buyers, grad the deal.

The article has been written by Neelesh Bora, Founder – My Property boutique private limited – reach at nb@mypropertyboutique.com

About My Property Boutique

My Property Boutique is India’s first offline and online real estate aggregator. Currently present with offline centers in 3 cities and digitally present in 27 cities. For more information log onto www.mypropertyboutique.com