Impact of Coronavirus on Indian real estate
While the adverse effects of the pandemic is already being felt across the world, varying opinions are emerging with regards to Covid-19’s impact on real estate, a health emergency that has force launched the biggest ever work from home experiment globally, putting a question mark on the relevance of workspaces in a post-Coronavirus world
Amid countries applying extreme measures to contain the Coronavirus outbreak, businesses have come to a grinding halt across the world, forcing monetary agencies to slash growth forecasts for the global economy. While the adverse effects of the pandemic is already being felt across the world, varying opinions are emerging on COVID-19’s impact on real estate, a health emergency that has force-launched the biggest ever work from home experiment globally, putting a question mark on the relevance of workspaces in a post-Coronavirus world.
India, where the economic growth is already set to slow down to a record 11-year-low, a prolonged lockdown, which started from from March 25, 2020 and has been extended till May 30, 2020, would further worsen the situation in Asia’s third-largest economy. Note here that the lockdown in India is now in its fourth phase amid a dramatic rise in the number of infections. As on May 25, nearly 1.40 lakh Coronavirus infections were reported in India.
As is evident, research agencies are predicting a near-term halt in growth of real estate in India. PropTiger.com data shows housing sales in India’s nine major cities declined by 26% in the period between January-March 2020.
“While the Chinese economy has been reeling under the impact of the Coronavirus contagion since December 2019, the situation started to get worrisome in India only in March 2020. Following the spike in number of infections, the government first announced a 21-day lockdown on March 24, and then extended it till May 30, keeping in mind the severity of the situation. The lockdown, which has virtually brought to a standstill most economic activity in the country, has hurt all sectors, including real estate. The adverse impact of the Coronavirus is visible on housing sales in the last quarter of the last fiscal because March is usually one of the biggest month for sales,” says Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and PropTiger.com.
On the contrary, deal volumes in office space in India increased 27% year-on-year in 2019, to an all-time high of over 60 million sq ft, showed a Knight Frank report. “The historic rise in the office transactions is a significant growth indicator for the office market as it represents the continued commitment of domestic and global corporations in the country’s growth potential despite the ongoing economic slowdown,” Knight Frank India CMD Shishir Baijal said in a statement.
However, any predictions made before the sudden outbreak of the global calamity stand retracted as the government gets busy devising plans to stop businesses in general and the economy in particular from sinking deeper into a slump, amid impending fears of the rupee declining to a low of Rs 78 against the US dollar.
While the real extent of the damage is hard to grasp in a scenario where every day is making a great difference, one thing is for certain – India’s realty would suffer short term shocks on account of the contagion.
COVID-19 Impact on Indian housing market
The Coronavirus spread has further delayed a recovery that might have seemed possible because of various government launched measures to revive demand though right now it doesn’t seem like prices will go down immediately. Niranjan Hiranandani, national president, NAREDCO, states that “Salvaging Indian realty, the second-largest employment generator is critical, not only from the GDP growth perspective but also for employment generation, since the sector has a multiplier effect on 250-plus allied industries.”
The centre in the recent past had announced higher tax breaks and lower interest rates on home loans to make purchases more lucrative, apart from setting up an Rs 25,000-crore stress fund for stuck projects.
The demand slowdown in the residential segment has already curtailed housing sales, project launches and price growth in India’s residential realty sector, which has been reeling under the pressure caused by mega regulatory changes caused by the Real Estate Regulatory Authority (RERA), the goods and services tax (GST), demonetisation and the benami property law.
SOURCE : Housing.com