The COVID-19 crisis has come as a sudden blow to the real estate sector in India. In addition to the halt in construction activities in the first three months of the outbreak of novel Coronavirus, there has also been a significant drop in the number of new residential launches across major metro cities since March 2020. In Apr-Jun 2020, hardly 1,400 housing units were added across top eight metro cities.   

Shortage of construction workers, ongoing liquidity constraints faced by the developers, and the withdrawal of homebuyers impacted the residential real estate market grimly in Apr-Jun 2020. Contrary to Jan-Mar 2020, when the launches outpaced sales by a significant margin, the quarter ending June 2020 witnessed a sharp decline of nearly 75 percent in the new launches. As per 99acres Insite Report for Apr-Jun 2020, the period witnessed the addition of a mere 1,400 units across the top eight metros. Of all, Delhi NCR, Mumbai, and Hyderabad reported the largest loss in terms of new launches, with a dip of 80-95 percent, each, QoQ. With near-zero sales in NCR, Chennai, and Hyderabad, the developers across major cities were forced to postpone launches in the said period.

While the North and West micro-markets of Ahmedabad remained the most popular in terms of new residential project launches in H1 2020, the same regions in Bangalore remained the worst affected markets, reporting a decline of 78 percent and 69 percent in new launches, respectively, during the reported period. In Chennai, South Chennai continued to be the preferred choice for developers, which accounted for over 50 percent of the total launches in H1 2020. Other than the lacklustre demand, an increase in the price of raw materials such as steel and cement contributed significantly to reduced launches across the city.

Amid all odds, several reputed developers experimented with online project launches, including Puravankara and Prestige in Bangalore, Oberoi Realty and Hiranandani in Mumbai, and Shriram Properties in Kolkata and Chennai. Speaking about the scenario in Mumbai, Tauqeer Hashmi, Proprietor, Maharashtra Properties, avers, “The city did not witness any new launches in the first two months post the announcement of the nationwide lockdown, i.e. April and May 2020. However, things began improving gradually from June 2020 onwards as developers started launching their projects online. Construction activities and property sales started picking up the pace post August 2020, as developers have now resorted to physical meetings, as against virtual conferences in the previous months. However, physical launches are only restricted to 10-20 percent of the total launches. Property rates, taking cognisance of the grim scenario, have taken a hit of 20-25 percent. Since July 2020 onwards, several projects were launched online, including Raunak City in Kalyan, Maximum Mumbai by Ruparel in Kandivali, and Akshar, which is a commercial project near Vashi. At present, nearly 50 percent customers are back in the market. However, despite an upswing in enquiries on the back of freebies and discounts offered by the developers, the volume of sales is low, nearly 10-15 percent of the total enquiries. This is primarily because the buyers are still sceptical about investing amid a dampened job market and need to physically inspect the property before blocking a huge sum of money. Therefore, until the market returns to normalcy and commutation options such as metro and local buses start operating, it would be difficult for the realty sector to recover completely.”

Not only residential but even the office real estate market witnessed a similar trend. As per a report by Knight Frank, new office space completions went down by 27 percent, YoY, and stood at 1.6 million sq m in H1 2020. While consumers remained reluctant to commit to big-ticket purchases such as housing, the developers struggled with supply bottlenecks in the form of raw material, labour, and credit availability. To overcome the crisis-like situation, the developers either kept a lid on the number of new launches, thereby focusing more on offloading the existing inventory or launched projects in lower-ticket segments to drive sales. The report by Knight Frank further states that nearly 58 percent of the new launches in H1 2020 remained confined under the Rs 5 million category.

New launches in top eight metros (Q1 2020 vs Q2 2020)

 

In Jan-Mar 2020

In Apr-Jun 2020

QoQ change

Ahmedabad

57

32

-44%

Bangalore

79

24

-70%

Chennai

43

14

-67%

Delhi NCR

16

1

-94%

Hyderabad

69

6

-91%

Kolkata

7

2

-71%

Mumbai

247

14

-94%

Pune

140

30

-79%

Source: 99acres.com

Given the present situation and the ongoing COVID-19 mayhem, it seems that the real estate segment might need further support to stay afloat during the crisis. Moreover, given the inclination of the buyers and the sops announced by the Government for developers in affordable housing, new launches are further likely to remain confined to this segment.  While the market will witness increased online launches amid the soaring concerns around social distancing, liquidity management will be of utmost importance for economic survival in the post-pandemic era.