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COVID-19: Housing sales to see 25-35% fall and office absorption to 13-30%

Anarock Property Consultant

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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 the 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 a 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 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. 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 renegotiate terms and costs. 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.

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