COVID-19 to Reduce Housing Sales by 25% in India

COVID-19 to Reduce Housing Sales by 25% in India

Anuj Puri 02/04/2020 4
COVID-19 to Reduce Housing Sales by 25% in India
  • Housing sales to see 25-35% y-o-y fall in 2020; new launches by 25-30%
  • Unsold housing inventory to remain stable, may even see 1-3% yearly reduction
  • Construction delays could run into several months for well-funded projects, few years for others; 4.66 lakh units to be previously completed by 2020-end face high risk of delays
  • Affordable housing target group most affected, limited income & unemployment fears to defer purchase decisions
  • Indian office sector to see significant impact by COVID-19; besides demand-supply decline, key occupiers to re-look office space requirements
  • Indian retail leasing & new mall completions to see 30-50% dip against previous growth estimates; revenue-sharing model to gain dominance
  • Technology to gain significant precedence in Indian real estate from 2020 onwards

COVID-19 Impact on Housing Sector

Current estimates reveal a substantial drop in demand and supply across various real estate segments in 2020. Housing sales could witness a 25-35% yearly drop in 2020 against the preceding year, reveals the ANAROCK report 'COVID-19 - Will it Reset Indian Real Estate?'

Residential sales in 2019 stood at approx. 2.61 lakh units across top 7 cities and may now fall between 1.70 lakh -1.96 lakh units. Likewise, new launches may also witness a 25-30% decline during the same period – from 2.37 lakh units in 2019 to anywhere between 1.66 lakh -1.78 lakh units.

Unsold inventory in 2020 will largely remain stable, with single-digit annual decline of around 1-3%. The nationwide lockdown has completely halted construction activity - project delays could run into several months for well-funded projects, and a couple of years for others. Nearly 4.66 lakh units across the top 7 cities earlier slated for completion in 2020 now face a high risk of delays.

The affordable housing segment, which gained significant traction over the last few years, 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% rise in unsold stock within this segment in 2020.

Anuj Puri, Chairman - ANAROCK Property Consultants says, “Besides 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 last three years. New business models will be tried, making players more reliant on technology for ensuring business continuity. Besides revisiting office requirements, corporates will keep employee health and hygiene of assets as the topmost priority.” 

“In Indian retail, the revenue-sharing model will become even more dominant. Retailers will prefer to partner with mall owners to mitigate risks arising from declining footfalls amid such unprecedented crises.”

COVID-19 Impact on Office & Retail Sectors

The report analyses the impact of COVID-19 on India's once-booming commercial office and retail space sectors, and the changing trends therein. For instance:

  • Current 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%. Net office absorption in 2020 is expected to drop to between 28-35 mn sq. ft. from the previous years’ 40 mn sq. ft. - a decline of 13-30%.
  • Office rentals will be under pressure as occupiers try and re-negotiate terms and cost. To reduce operations cost, telecommuting and rostered timings may become the new norm, depending on the nature of business - thus leading to higher demand for flexible workspaces.
  • Indian retail sector net leasing is estimated to be between 3.1-4.3 mn sq. ft. in 2020, as against 8.5 mn done in 2019. This means a decline of 49-64%. Meanwhile, new mall completions will be between 4.2-5.9 mn sq. ft.
  • Pressure on rentals likely to be in the range of 10-15% in 2020 in terms of effective collections from retailers by mall owners.

Download the report 'COVID-19 - Will it Reset Indian Real Estate?'

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  • Kate Callaghan

    This is terrible for the real estate sector

  • Chris Jordan

    No need to panic, this is a global pandemic

  • Simon Price

    Many people in the real estate sector will lose their job

  • Diana L

    I feel sad for realtors

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Anuj Puri

Real Estate Expert

Anuj Puri, Chairman of ANAROCK Group is a highly respected industry authority and thought leader with 30 years' experience in leveraging Indian and global real estate opportunities. His company ANAROCK has a staff complement of over 1800 qualified and experienced professional, with offices in all major markets in the country, dedicated services in Dubai and a global footprint with over 80,000 preferred channel partners.

   

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