The unmeasurable impact of COVID-19 is threatening to change several industries. One such industry is the real estate segment of India. As per various industry experts, the sector is set to witness a drastic fall in sales. The high inventory piled up by many realtors is also going to impact the property prices.
Talking about the current situation, Murtuza Arsiwalla, associate director equity research, Kotak Institutional Equities said, “The present scenario of a national lockdown is unprecedented. With uncertainty looming over jobs, salary cuts, and future cash flows, big-ticket discretionary purchases would be the last thing on the buyer’s mind.”
At this juncture, big players like Anarock Property Consultants Pvt. Ltd are expecting a decline of 25-35 per cent in home sales in 2020.
“Property prices may come down by 10-20 per cent across geographies, while land prices could see an even higher reduction of 30 per cent,” said Pankaj Kapoor, chief executive of real estate consultancy firm Liases Foras.
The credit rating agencies are starting to worry about defaults in the sector due to the severity of the COVID-19 impact. Sachin Gupta, senior director, Crisil Ratings said, “If the lockdown prolongs, it would adversely hit cash flows of developers. This could then make real estate one of the worst-affected sectors from a credit rating perspective.”
The recovery is expected to be slow and unattractive. The developers may be able to utilize the collections from existing sales for some time.
However, the problems will only increase with time. The demand from investors has already decreased in the residential real estate sector. Big-ticket discretionary purchases would be the last thing on the buyer’s mind at this point of time. On the other hand, banks are more cautious with loan approvals with the possibility of job losses and pay cuts looming large.
The question is, how will the buyers and investors respond to the situation after the end of this epidemic? According to the experts, the duration of the crisis and lockdown will decide the fate.