Mar 2020
20

Impact of CORONAVIRUS on Real Estate in India

By Adil Engineer, Jt. Managing Partner, Credberg
1469

While the Central Government and all the State Governments have done a spectacular job in implementing measure to prevent the spread of the Coronavirus across the country, the impact of the virus and the measures undertaken to stop the rampant spread across the country, across industry in general and more particularly the Real Estate Industry will be tremendous, both in the short term as well as in the long term.

The effect of the Corona virus can be seen across all industries, be it manufacturing, tourism or services and all business are currently reeling under the impact of it and considering that large workforces are being asked to work from home or take forced leave, business is being hit in a big way. One only hopes that the Government continues to be proactive in protecting business and jobs by providing reliefs to offset the losses that business have and will continue to suffer while the outbreak is brought under control. 

The Real Estate Industry which was just beginning to show the very early signs of a slow recovery, will suffer a further setback on account of this unprecedented crisis caused by the Corona virus outbreak.

The impact on the various asset classes of real estate will felt be as under:

Residential Sector - The negative sentiment towards residential real estate will be further exacerbated and it is likely that the already highly reduced volume of sales of residential units will fall further. One of the likely fallouts of impact of the virus on businesses and jobs is that many home loans may go into default as borrowers struggle to meet EMI payments. 

Commercial Sector - While this asset class has been the savior of the industry over the past couple of years, the off take of leasing in the near term is going to be severely impacted as the services and IT industry struggles with maintaining the large workforces in these building. Work from home and the uncertainty of business in the near to medium term will definitely cause the tremendous growth seen in leasing across the country to slow down.

Retail - Various State Government’s directives to shut malls down to implement social distancing have already come into play and in the short term this is going to directly impact the operations and profitability of malls, many of which operate on a basis where part of sales revenue is appropriated towards shop rent. Further, the impact of social distancing and the residual fear of crowded spaces will keep people away from malls in the short to medium term and it is unlikely that footfalls at malls will be large even when these are permitted to open in the near future.

Hospitality - With the curbs on International travel and with the widespread advisory to curb all non- essential travel, the hospitality industry is already showing signs of acute strain. People have definitely put off all vacation and holiday plans in light of the virus and will continue to do so even in the near term when the crisis has passed. In is also unlikely that business travel which has also been curtailed currently will bounce back when the crisis passes as impacted business will continue to curtail the same as they limp back from the effect of the virus.

About Author

Adil Engineer Jt. Managing Partner, Credberg
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Updated: 20 Mar 2020
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