Corona may take a heavy toll on housing sales

Hyderabad: Current estimates reveal a substantial drop in demand and supply across various real estate segments in 2020. Housing sales could witness a 25-35 per cent yearly drop in 2020 against the preceding year, reveals a report.

Residential sales in 2019 stood at nearly 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 per cent decline during the same period – from 2.37 lakh units in 2019 to anywhere between 1.66 lakh -1.78 lakh units, according an Anarock report titled 'COVID-19 - Will it Reset Indian Real Estate?'

Unsold inventory in 2020 will largely remain stable, with single-digit annual decline of around 1-3 per cent. Project delays could run into several months for well-funded projects, and a couple of years for others as the nationwide lockdown has completely halted construction activity.

Nearly 4.66 lakh units across the top 7 cities earlier slated for completion in 2020 now face a high risk of delays, the report added.

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 per cent rise in unsold stock within this segment in 2020.

"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," said Anuj Puri, Chairman, Anarock Property Consultants.

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, he added. The report also analysed the impact of COVID-19 on India's once-booming commercial office and retail space sectors, and the changing trends therein.

"Current estimates indicate office supply will remain between 33-40 million sq ft in 2020 as against nearly 47 mn sq ft in 2019 - a reduction of 15-30 per cent. Net office absorption in 2020 is expected to drop to between 28-35 mn sq ft from the previous years' 40 million sq ft, a decline of 13-30 per cent," the report said.

It further said that office rentals would 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 million sq ft in 2020, as against 8.5 million done in 2019. This means a decline of 49-64 per cent. Meanwhile, new mall completions will be between 4.2-5.9 million sq ft," the report said. Pressure on rentals likely to be in the range of 10-15 per cent in 2020 in terms of effective collections from retailers by mall owners.