Impact of Coronavirus on Indian real estate

Amid countries applying extreme measures to contain the Coronavirus outbreak, businesses have come to a grinding halt across the world, forcing monetary agencies to slash growth forecasts for the global economy, India included. Projections by the International Monetary Fund (IMF) say India is headed towards historic contraction of 4.5% in FY21 as severe fallout of the pandemic.

While the adverse effects of the pandemic is already being felt across the world, varying opinions are emerging on COVID-19’s impact on the real estate sector, a health emergency that has force-launched the biggest ever work-from-home experiment globally, putting a question mark on the relevance of workspaces in a post-Coronavirus world.

India, where the economic growth is already set to slow down to a record 11-year-low, a prolonged lockdown— which started from from March 25, 2020 and was eventually extended till June 7, 2020, amid a dramatic rise in the number of infections — worsened the situation in Asia’s third-largest economy.  As on June 27, over 5 lakh  Coronavirus infections were reported in India.

As is evident, research agencies are predicting a near-term halt in growth of real estate in India. data show housing sales in India’s nine major cities declined by 26% in the period between January-March 2020.

“While the Chinese economy has been reeling under the impact of the Coronavirus contagion since December 2019, the situation started to get worrisome in India only in March 2020. Following the spike in number of infections, the government first announced a 21-day lockdown on March 24, and then extended it till June 7, keeping in mind the severity of the situation. The lockdown, which has virtually brought to a standstill most economic activity in the country, has hurt all sectors, including real estate. The adverse impact of the Coronavirus is visible on housing sales in the last quarter of the last fiscal because March is usually one of the biggest month for sales,” says Dhruv Agarwala, Group CEO,, and

While deal volumes in office space in India increased 27% year-on-year in 2019, to an all-time high of over 60 million sq ft, the growth momentum in India’s commercial segment is also likely to get derailed due tot the virus attack.

Any positive predictions about its growth made before the sudden outbreak of the global calamity stand retracted as the government gets busy devising plans to stop businesses in general and the economy in particular from sinking deeper into a slump, amid impending fears of the rupee declining to a low of Rs 78 against the US dollar.

While the real extent of the damage is hard to grasp in a scenario where every day is making a great difference, one thing is for certain – India’s realty would suffer short-term shocks on account of the contagion.

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Housing market in India’s top 9 cities (January-March 2020)

Sales Down 26%
Project launches Down 51%
Inventory 7,38,898 units

Source: PropTiger DataLabs


COVID-19 Impact on Indian housing market

The Coronavirus spread has further delayed a recovery that might have seemed possible because of various government launched measures to revive demand though right now it doesn’t seem like prices will go down immediately.

Niranjan Hiranandani, national president, NAREDCO, states that “Salvaging Indian realty, the second-largest employment generator is critical, not only from the GDP growth perspective but also for employment generation, since the sector has a multiplier effect on 250-plus allied industries.”

The centre in the recent past had announced higher tax breaks and lower interest rates on home loans to make purchases more lucrative, apart from setting up an Rs 25,000-crore stress fund for stuck projects.

The demand slowdown in the residential segment has already curtailed housing sales, project launches and price growth in India’s residential realty sector, which has been reeling under the pressure caused by mega regulatory changes caused by the Real Estate Regulatory Authority (RERA), the Goods and Services Tax (GST), demonetisation and the benami property law.


Impact of Coronavirus on Indian real estate


According to rating agency ICRA, the pandemic, if not contained soon, would not only significantly impact the economy but also adversely hit developers’ cash flows and project delivery capabilities.

“In case of a longer outbreak though, the impact on overall economic activity is likely to be deeper and more sustained, which would result in a more significant impact on developer cash flows and project execution abilities, giving rise to wider credit negative implications,” ICRA said in a recent note while also adding that the three-month moratorium announced by the RBI on March 28 on loans will provide some comfort to builders. This moratorium was subsequently extended by the RBI, on May 22, 2020, till August 31, 2020.

“The injected liquidity of Rs 3.74 lakh crore (by the RBI) along with the moratorium on all term loans by financial institutions will alleviate short-term liquidity concerns and help developers, as well as home buyers . It is a big relief for developers and buyers to help them mitigate the challenges faced by them currently,” says Ramesh Nair, CEO & Country Head of JLL India.

Expecting delays in project completion and extending support to the builder community, the the government has also said developers could get project deadlines extended by six months through the RERA citing the force majeure clause.

You may like to read: What is force majeure and how it works in real estate? 

“Due to the lockdown announced on account of the COVID-19 outbreak, both, construction and sales activity, have come to a complete halt across the entire real estate sector. On several sites, construction workers, too, have gone back to their home towns. Even after the lockdown, activity will only recommence gradually, which will cause project delays of anywhere between 4 to 6 months at the least,” said Sharad Mittal, CEO and head, Motilal Oswal Real Estate Funds.


COVID-19 Impact on home buyers in India

If low interest rates (home loan interest rates are at 8% now) and high tax exemption (rebate against home loan interest payment is as high as Rs 3.50 lakhs per annum) were going to make a change in the consumer behavior, the Coronavirus outbreak is likely to halt that shift, at least in the near to medium term.

With property seekers unwilling or unable to undertake site visits, this could result in the postponing of purchase decisions. “With the Coronavirus pandemic impacting all sectors of the economy, the troubles have compounded for India’s realty sector, which has been dealing with a ‘challenging scenario’ since the economic and policy reforms were introduced. The slowdown since February-end is apparent and while site visits are almost non-existent, the decision-making process is hugely delayed,” says Hiranandani.

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The fact that businesses would scale down their workforce would also force many prospective buyers to wait for clarity on their job security, before making a final decision on property purchase.

Even though the RBI has announced several rate cuts, bringing the repo rate down to 4%, any positive effect of the move on buyer sentiment would be seen only in the medium to long term. The step, however, would come as a major support for existing buyers, who might struggle to pay EMIs in the short-term or medium-term, because of the lockdown or in the event of job loss.

However, the pandemic has also made buyers realise the value of home ownership, thus, giving a sold sentiment boost to residential real estate.

In a survey conducted by in collaboration with NARECCO, 53% respondents said they have put their plans to buy a property on hold only for six months and plan to return to the market after that. Nearly 33% respondents in the survey also said they would have to upgrade their homes, in order to work from home. In a renters’ survey, 47% respondents said they would like to invest in property if it was rightly priced.

See also: What will buyers expect in a post-COVID-19 world?


Impact of Coronavirus on Indian real estate


COVID-19 Impact on builders in India

Slump-hit builders were pinning their hopes on government support to shed the increasing unsold stock even as an ongoing crisis in the country’s non-banking finance sector, a key source for housing sector funding, made borrowing extremely difficult, jeopardising their plans to deliver projects within the promised timeline.

Developers were sitting on an unsold stock worth approximately Rs 6 lakh crores, as of March 2020, show Near-halt on construction activity amid a lockdown in India to contain the virus and delay in supply of manufacturing material and equipment from China, will further push delivery timelines of ongoing projects, consequently increasing the overall cost for developers. Through furious efforts, China, the country where the virus originated, has been able to rein-in the pandemic, with workers returning to offices. However, as the situation in India worsens, builders here will be forced to postpone orders.

Several measures announced by the government in its Coronavirus-specific stimulus package and the EMI holiday for developers during the crucial period are some steps that might offer some relief to the builder community.

“The pandemic menace has hit at a particularly sensitive time. Across realty companies, this is the time when statutory payouts and streamlining of balance sheets happens. In this challenging time, we have asked the government for some economic interventions like rescheduling loan repayments, a one-time rollover for debt restructuring and deep interest rate cut,” Hiranandani added.

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COVID-19 Impact on office space in India

Companies worldwide have announced remote working for employees to contain the virus spread, triggering a debate if work-from-home could replace office spaces in future. While the answer to that question depends on the ultimate level of success achieved by businesses through remote working, a near-term jolt to the commercial real estate in India is unavoidable.

According to JLL India, the demand for office space across seven major cities is likely to drop by around 30% this year, from record leasing in 2019, as companies postpone expansion plans. Consequently, supply will also drop by 30%-40%.

The US-based property consultant had also projected a gloomy picture in its earlier report on the subject. “Office utilisation rates will fall as remote working increases and landlords with exposure to short-term leases are the most vulnerable as delay to investment activity and softer rental growth than previously forecast are headwinds to 2020 performance,” said JJL’s report, titled COVID-19 Global Real Estate Implications.

“Co-working operators in particular may be at risk if members decide to cut short-term contracts; hybrid operators with more secure medium-term income will be less exposed,” the report added.

While stating that the demand for remote working and investment in collaboration technologies would grow, fast-tracking a widespread adoption of these practices, the report, however, says that this trend cannot be perceived as a threat to future office demand. “A focus on higher utilisation and densification of space has already driven efficiencies and resulted in limited excess space in optimised portfolios. Rising employment in relevant sectors will more than outweigh any impact on demand from home-working,” the report says.

Experts, however, expect the pre-COVID-19 growth momentum in this segment to get restored eventually.

While stating that the work-from-home run was a reaction to the nationwide lockdown to contain the Coronavirus outbreak and it is unlikely to become a permanent concept in real estate strategies, Anshuman Magazine, chairman and CEO, India, south-east Asia, middle east and Africa, CBRE, says the demand for commercial real estate will remain robust. “This is due to challenges such as psychological impact on employees, data security and monitoring productivity,” Magazine was quoted in the media as saying.

According to numbers available with CBRE, gross office space absorption touched a historic high of 63.5 million sq ft in 2019, nearly 30% higher than 2018. Office stock across seven leading cities is expected to cross 660 million sq ft by the end of 2020.

See also: How to prepare for the reopening of your office


COVID-19 Impact on mall developers in India

The anxiety surrounding the virus spread resulted in footfall in malls in India reducing by half before the government ordered a complete lockdown. If the situation persists, how would it impact mall developers?

“Low footfalls and subsequent closure of malls will impact developers’ debt servicing against the project. Even a relaxation from banks for the short-to-medium term should not have a big impact. However, if the virus scare continues beyond one to two quarters, debt servicing challenges may last for a longer period,” points out Rohan Sharma, research head, Cushman and Wakefield.

“Post the advisory withdrawal when malls are open to the public, footfalls will likely limp back to normalcy as people will take time to regain confidence to throng public places in large numbers. This will also bring a fundamental shift in how mall owners will now look at their properties. An increased focus on air quality, improving hygiene and sanitisation and awareness is what will bring back people to their malls,” Sharma adds.

“The impact of COVID-19 in the form of shutdown of retail outlets and malls as also entertainment and fitness centers has put commercial real estate deals on a wait-and-watch mode,” points out Hiranandani.

According to Nair, mall operators have been the most affected, and they would have to act reasonable to tide over the crisis amid projects of rising vacancies in shopping malls.


COVID-19 impact on warehousing in India

On the assumption that e-commerce will grow significantly in the post-COVID-19 world, there have been projections that the warehousing sector in India would stand to gain immensely. More importantly, this growth will not be limited only to the big cities but it will be spread across smaller cities, as well.

According to property consulting firm Savills India,  the supply of new warehousing space in 2020 could be only 12 million sq ft as against the earlier projection of 45 million sq ft. However, as the demand grows in
the long term, a significant capacity increase  could be expected in 30-35 new tier-2 and tier-3 cities.


Indian real estate after Coronavirus: Top 11 projections

  1. Site visits to drop, impacting sales numbers.
  2. Project deadlines to extend, pushing completion farther.
  3. Overall cost of project to increase amid delays and supply constraints.
  4. Inventory levels to increase, intensifying pressure on builders.
  5. Prices might move slightly upwards despite the slow demand.
  6. Home loan interest rates to fall after repo rate cut to 4%.
  7. Remote working to gain traction in future as businesses embrace work from home culture.
  8. Higher investment likely in future office spaces to make them better prepared for crisis situations.
  9. Occupancy levels in office spaces to decline in the near term as remote working picks up.
  10. NRI investment in real estate may improve amid rupee fall.
  11. Cases of builder insolvency might increase as liquidity situations worsens.



Will COVID-19 impact home sales?

Housing sales might see a drop in the aftermath of the virus outbreak as businesses might cut jobs to offset losses.

Will COVID-19 impact property prices?

Prices might not undergo any significant change as the overall cost of projects is likely to increase.


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