Office real estate sees increased interest after lockdown. Experts say that the Covid-19 pandemic has made the importance of technology and virtual practices
How will real estate perform as a result of the COVID-19 pandemic?
The unprecedented spread of the novel coronavirus has led to stringent measures like a lockdown on the movement of people being imposed. The pandemic has affected all sectors of the economy in several ways causing a slump in activity and loss of jobs. This also means that any growth forecasts made for the upcoming quarter and year may not hold true. One of the sectors that has been worst hit by the COVID-19 pandemic in India and across the world is real estate. According to a survey by a leading online real estate portal, Proptiger, the sales of housing projects has dipped by 26% across 9 major Indian cities in the first three months of 2020. Market sentiments are at their lowest with a survey done by Knight Frank showing that around 50% of the stakeholders believe that rents are going to depreciate or remain at the same level.
The impact will be seen differently for home buyers, builders, and commercial real estate markets. Here is a breakdown of the impact-
Impact of COVID-19 for builders
Builders are seeing a stoppage of work for projects under construction because of the absence of labour and raw materials, stoppage of property visits by prospective buyers, delaying of project launches, and hence, a decrease in sales. Overall, cash flows and capabilities to ensure that projects are completed have been impacted. Additionally, the unsold stock of projects has piled up.
Impact of COVID-19 on home buyers
The fall in demand for housing has been followed by the government’s measure for a fall in interest rates for home loans and a high tax break on these loans. This is an incentive for demand from home buyers to pick up. Also, since the decision to buy a home cannot be finalized based on site visits in person, have introduced online booking and shortlisting options based on AR/VR-led tours of projects. These help prospective buyers get an experiential feel of the home which is essential to build trust and assurance before a purchase. Homebuyers who are looking to invest in this time period will have to opt for this option.
Impact of COVID-19 on commercial real estate
With the adoption of working remotely during the lockdown, the demand for commercial real estate like office spaces, co-working spaces, etc has reduced. This has even brought up the possibility of whether working from home would replace office spaces in the future. However, this will depend on how feasible the arrangement. Utilization of these spaces will fall and the builders offering short-term leases will be impacted the most.
The government’s relief measures of providing a 3-month moratorium on loans is also sure to provide relief to builders and consumers and hopefully, recovery is on its way.
Check out this article to learn more: