Impact of COVID-19 on real estate of major cities in India
April 23, 2020
The pandemic has surely trapped the world in a cage, where the chances of things getting alright seems a little dim shortly. The indefinite period of staying inside homes has crashed the market to a record low. The global economy is going through its worst phase, and even the mega developed economies are finding it hard to sustain the terror of the virus. Nobody has any clue about when things will get back on track, and one does not have many options besides waiting.
Talking about India, where the virus has claimed more than 500 lives and has affected around 17,000 people, the country has got the lockdown extended for another 19 days. A decision much needed, this will indeed benefit the country by resisting it to reach in stage 3. But this is going to hit the Indian economy very hard. The world bank has already predicted the GDP to fall around 1.5-2.8 % in a report released earlier. The economy, already suffering a slowdown, is set to witness the slowest economic expansion since the balance payment crisis of 1991-92.
Although there are reports which are in complete contrast to the World Bank report but sooner or later, we have to accept that the sudden pause in the functions is expected to raise the loss of income and unemployment, which has distressed a lot of people for their uncertain future.
One of the significant contributors to the country’s GDP, the cash-driven sector, is also facing the losses due to the COVID-19 pandemic. The real estate sector that was already going through a rough patch of liquidity crisis was set to get back on track by recovering through NRI investments in the last quarter of 2019. The conditions were expected to get better before COVID-19 knocked on the doors. The pandemic that has forced the world down to shut down entirely has impacted the real estate sector adversely. The workers are back home, the construction activities have wholly stopped, the recession is on the way, and all this is leading towards a significant setback to the real estate developers. There is going to be a dip in the number of buyers that will impact the demand and supply equilibrium.
Let’s have a look at the major states and cities that will be adversely impacted by the lockdown due to the pandemic.
How badly is the market affected in Kolkata?
More than 700 under-construction projects have been delayed due to the ill effects of the global pandemic. The inquiries have gone to minimal, site visits have stopped, the rental market has also been affected, and several developers who were planning for their new launches around the Bengali New year have deferred until the next festive season.
The popular localities with the maximum number of under-construction projects are New Town, Rajarhat, E M Bypass, Tollygunge, Madhyamgram, Joka, Howrah, Alipore, New Alipore, Garia, Saltlake and Sealdah, etc.
West Bengal has a considerable number of migrant workers from Jharkhand, Chhattisgarh and Uttar Pradesh. The COVID crisis has left the construction sites in limbo as the migrant workers have left for their homes.
What are the conditions in Chennai?
Chennai’s real estate sector was on a high with several new project launches and an increased number of sales, but the scenario is a whole different story now. The projects are delayed, and so are the investments. Potential buyers have lost interest, and the future seems uncertain for Chennai real estate developers.
The demand was high for the commercial spaces after a record absorption of 6.2 million square feet last year, and the market was expecting an intake of 5 million square feet this year. CMDA, which has given the nod to construct buildings in 41.2 lakh square feet in the past two months that is 140% more than last year, has put its thoughts on hold now.
How affected is Bengaluru?
Bengaluru, the IT hub of the country has also witnessed growth in the commercial real estate market. However, it showed marginal growth in leasing activity during Jan-March, if compared to the other cities in the country. According to a survey, Bengaluru led the market with 30% of total gross absorption. Across the major cities, the IT-BPM sector continued to dominate the leasing activity in the first quarter of 2020.
How is Delhi-NCR coping with the crisis?
New project launches planned in Southwest and West Delhi have been shelved for the foreseeable future. Some of the projects were planned to get launched during April-June, but the situation has led to postponing the event to a later unspecified period. Owing to the pandemic, the upcoming quarters are set to witness a plunge of about 15-20 percent, as per multiple industry reports.
What is the scenario in Mumbai?
Mumbai Metropolitan Region (MMR) has reported a decline of 78% in bookings of residential apartments from January due to the coronavirus outbreak. The country’s most expensive property market has recorded a drop in customer walk-ins by almost 80%, 7,766 confirmed scheduled site visits were canceled due to COVID-19 in 30 days, as per CREDAI-MCHI and various real estate experts.
The status in Pune
A drop of 19 percent is recorded as Pune has launched about 7,790 units in Quarter 1 of 2020 compared to 9,550 units in Quarter 4 . the supply ratio also got hit by a decline of 56 percent. Talking about sales, a decrease of 23 percent has been recorded over the previous quarter. An overall reduction of 42 percent in the first quarter of 2020 is a significant setback due to COVID-19.
How is Hyderabad dealing?
Drop-in new launches in Hyderabad are recorded over 11 percent, with about 3,380 units launched in Quarter 1 of 2020. The yearly decline is registered at 30 percent. Such a massive decrease percentage in the first quarter of the year shows the impact of COVID-19 in the city.COVID-19 has impacted the home loan collections by 250% in March as against January, while there was a 200% rise in cancellations in the third week of March.
The pandemic has undoubtedly affected the cash-driven market, and the impact is adverse in most of the places. However, if reports are to be believed, it is said that India will witness an increase in investments as investors are still very bullish about the Indian office assets in the long term. This has given a much-needed hope to developers in the time of crisis, and once these difficult times are over, we might witness a significant recovery of the sector and the country.