Covid-19 Impact on realty will be severe for 6-12 months

With Covid-19 pandemic crippling the economy and taking heavy toll on every key sector, real estate is obviously not immune to it as operations in the sector came to a standstill across the country. In this backdrop, a KPMG report reveals that the impact of pandemic and subsequent lockdown will be severe for next six to 12 months. As consequence, realty companies and developers will be forced to contract operations, revisit planned developments, expansions, and investments across the sector.

The report titled Covid-19: React, adapt and recover – The new reality: A perspective on the Indian real estate sector' estimated that the country's key sector is likely to lose Rs 1 lakh crore by end of the current fiscal year.

To mitigate impact in the short term, the real estate sector is likely to focus on cost optimisation, liquidity improvement, space design/layout efficiency maximisation, re-negotiations of contracts, and calibration of business operating models across the board. In the medium term, as the situation moves closer to normalisation with easing of lockdown across India and globally, recovery process will see rapid traction, bringing new opportunities within specific real estate segments.

However, with physical distancing norms and workplace health safety regulations affecting businesses, the real estate industry is likely to see a structural transformation, which will bring forth opportunities in untapped real estate segments such as data centres, integrated supply chains, warehousing, self-sustaining industrial parks, design efficiency processes and commercial and hospitality spaces that can implement preventive hygiene.

However, with staggered revival, the long-term outlook for the real estate sector in the coming 18–24 months may likely emerge positive, the report observed.

Chintan Patel, Partner and Leader – Building, Construction and Real Estate, KPMG in India, said, "With this recent pandemic outbreak, the real estate sector is likely to be handicapped in the short term, impacting over 250 related industries and economic sectors. In addition to capitalising on the intervention proposed by the government, the industry should resume operations post lockdown by leveraging technology innovations for enabling employee and consumer health safety standards, design flexibility (work from home), cost optimisation and consumer engagement (such as AI, VR, BIM, etc.), focused localisation of supply chains, reorganisation of business models, which is likely to revive activity, accelerating Indian real estate's turnaround over the coming 12–18 months".