COVID-19 has created an unprecedented challenge for the world. The Economy of all the countries have been highly impacted and the effect is visible in almost every sector. Real Estate is no exception to this. It contributed near to 7% of Indian GDP and had almost 15% of labor employed in it. More than 250 small and big industries get less or more affected by the changes that happen in Real Estate. Therefore, we need to understand what could be the situation of Real Estate Post COVID 19.
So, here, firstly we will make you understand the sections within the real estate, then give an understanding of what people think at present, and then give a list of things that can be expected in Real Estate Post COVID 19. .
While one reads further, one must remember that it is the written considering the data, reports, survey, and expert views available until June 2020.
(I) Office Markets
(II) Residential Markets
(III) Retail Market
Here we move forward to know what are the views of people on Real Estate post COVID – 19. This is as per a survey done by NAREDCO and housing.com.
At present, 32% of people believe that the economic outlook will improve against 27% thinking that it will remain the same as it is while 41% thinking that it can even go worse. While 51% are confident of income stability outlook, another 49% are not sure for the same.
Among the other 3 assets, and Real Estate for investment, 35% of people chose Real Estate. However, 81% of people chose to delay their buying for at least 6-12 months. Also, buying these properties, which is important for 68% of people is the affordability and credibility of the developers. This survey gives us light on things that can come in the near future.
The consumers themselves have given input, that, despite low rates, people do not want to buy now. Their confidence is down at present, which is quite understandable considering the situation. However, people still consider buying properties as a good investment, which is also visible.
Now, we will have a deeper insight into the three divisions, individually.
Firstly, the office market. In the office market, there is a postponement visible at present as the companies are opting for work from home. In the short term, there can be issues related to labor as well as getting the materials for building. While in the middle term, One can observe that the capital expenditure has curtailed, and so the new projects and the demand for the same will at least take a year to rise again. However, as the previous crisis points out, recovery also is possible. Like in 2008, the office market demand was for 32 million, and it went down to 20 million, but again rose to 33 million. And in the long-term, the need for new offices and expansion will become a need as enhanced cleaning and cellularization increases. One will observe a decrease in the densification of offices.
Also, One needs to understand that work from home cannot take the need for offices as only 5% of operations work and I0% of technical work, can be done from home. The trend of co-working space could decrease as people will avoid spaces where strangers are, mostly in urban cities. So, the overall outlook for office markets in Real Estate post COVID – 19 is good.
The second division where we estimate the future, is the residential market. Earlier, this division was struggling with the project delay, regulatory changes, and low sales. The one thing that has improved from the past is that the valuation at present is quite realistic and hasn’t gone into speculations as it happened in 2008. Secondly, the dependence of this market on FIIs is quite less, so when the economy recovers, the money tends to reach this division first.
The suspension of RERA by the government shows a positive direction. A bounce back in this area will take the utmost time. Matching the reducing affordability of a customer, for a new or an old project would be the need of the hour. Consolidation within the competitors will be seen. The luxury market will be difficult to ace at least for a year. Further, to make sales, Reduction in price can occur. Restructuring of NBFC, Extending RERA, and reduction in loan rates can help in the future. So all in all, the Resident market has a dependency on the reforms, as to how the whole economy recovers. It will require government stimulus to grow at a good pace.
The third division which we are going to discuss is the retail market. The retail market will significantly depend on the business it is in. The malls will have to maintain sanitation in the future, to remain attractive and the rent is expected to be stable, as the focus will be on localization. The industries like hotels, cinema and tourism will take the longest to recover. In the retail sector, one can observe consolidation, while the expansion can be expected less.
Businesses depend on Consumer confidence and how they spend. Therefore, it is important to improve the confidence of the customers. Thus, real estate will improve in the future, with the help of structural reforms and government stimulus.
The present COVID 19 crisis will change the outlook and structure for the offices. The ones who stay confident and intact, including the companies and the investors, will find success in the long term.
Sources-Livemint,Housing.com,Moneycontrol, Deccan Chronicle,JCC India,9 9acres,makan,NAREDCO