Residential real estate sales in top seven Indian cities are likely to register an annual decline of 25 to 35 per cent this year due to major disruptions caused by the COVID-19 outbreak, according to a new report by property brokerage firm Anarock.
Consumer sentiments are likely to remain weak for rest of the year 2020 unless India can contain the coronavirus within the stipulated lockdown period and also there is some amount of sector-specific economic revival package announced by the government, it said.
"The sector had already been grappling with subdued demand and liquidity crisis for a long period. The pandemic has led to a screeching halt of new developments and pushed the probable recovery further away by a few years," said the report titled 'COVID-19: Impact on Indian RE Sector.'
The countrywide lockdown until mid-April has halted all activities. As evident, project sites are shut, site visits have stopped, and construction activity has come to a grinding halt, eventually impacting housing sales.
Also, said the report, developers have deferred their new project launches for an unknown period.
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The residential sector was already caught in the grip of delayed project deliveries, liquidity squeeze for developers, high unsold inventory and a growing proportion of stalled projects. The liquidity crisis also led to significant job losses in the past.
As per industry estimates, nearly three lakh had to be laid off as developers were unable to process their bills. While many developers were overleveraged, the current pandemic has made the situation grim to sustain employment levels.
The report said it is anticipated that in the short-to-medium term, employment levels are likely to be affected significantly.
Besides residential segment, commercial real estate is also not immune to the COVID-19 fallout. Corporate occupiers are seen delaying their leasing decisions and still several MNCs and businesses are testing new waters of the work-from-home option. If proved successful, it could impact leasing activities in the future.
Retail businesses, highly dependent on consumer spending, are also witnessing a momentary slowdown and reduced interest from global brands who may now consider revising their expansion plans.
Retailing as a business is seasonal and the current COVID-19 crisis indicates that during this year's vacation season, Indians will be either locked down in homes or prohibited to congregate. Thus there will be muted buying and muted spend on eating out, recreation and entertainment.
"As a result, in our opinion, consumer spending is likely to dip in the current year. Not only lockdowns and social distancing but also the overall economic gloom and employment uncertainty are likely to bear an impact on consumer spending," said the report.
In the office segment, net absorptions in 2020 are expected to drop by 17 to 34 per cent from the pre-COVID-19 estimates.
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