COVID-19 to reduce housing sales by 25-35%, office absorption to fall 13-30%: Report

In a base case, property consultant Anarock said that sales could drop 25 per cent to 1.96 lakh units this year from 2.61 lakh units in 2019 across seven major cities- Delhi-NCR, Mumbai Metropolitan Region, Kolkata, Chennai, Bengaluru, Pune and Hy...

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Anarock said that commercial real estate is also not immune to the COVID-19 fallout.
Housing sales across top seven property markets in India is likely to witness a 25-35% year-on-year drop in 2020, while absorption of office spaces is also likely to dip 15-30% owing to the impact of Coronavirus pandemic.

In 2019, residential sales stood at around 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% decline during the same period-- from 2.37 lakh units in 2019 to anywhere between 1.66 lakh -1.78 lakh units, said ANAROCK Property Consultants.

Nearly 4.66 lakh units across the top 7 cities were earlier scheduled for completion in 2020 now face a high risk of delays. 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.


Unsold inventory in 2020 will largely remain stable, with single-digit annual decline of around 1-3%.

The affordable housing segment, which had 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, ANAROCK said.

“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,” said Anuj Puri, Chairman - ANAROCK Property Consultants.

In retail space transactions, the revenue-sharing model is expected to become even more dominant as retailers will prefer to partner with mall owners to mitigate risks arising from declining footfalls amid such unprecedented crises.

Current estimates indicate office supply will remain 33-40 million sq ft in 2020, down 15-30%. Net office absorption in 2020 is expected to drop to 28-35 million sq ft, down 13-30%.

ANAROCK expects office rentals will 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 3.1-4.3 million sq ft in 2020, a decline of 49-64% from last year. Meanwhile, new mall completions will be 4.2-5.9 million sq ft. Rentals are expected to be down 10-15% in 2020 in terms of effective collections from retailers by mall owners.
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