Coronavirus has taken over the world and impacted every industry sector there is. With the market crashing and the world delving into a public health crisis. Along with an early recession, there is a lot that is to be looked at. Especially in the housing market segment.
Here are some ways in which the spread of COVID-19 or Coronavirus has impacted the housing market in 2020:
1.Impact on Homebuyers in India
Project site visits have suddenly come to a halt for all homebuyers in India as the country faces perpetual lockdown. This means most decisions of purchase will be postponed. for the time being.
The fact that a lot of buyers are currently also facing job insecurity due to the lay-offs by multiple companies means the crop of potential homebuyers is decreasing.
The RBI repo rate cut has brought the rates down to 4.% for the banks. The end-users will definitely benefit from this but in the long run. It will also benefit customers who are already paying off home loans, but for those who are not homebuyers yet, are still likely to stall their home buying decision.
2. Impact on Real Estate Industry
A lot of builders and developers are sitting on a stock of newly built homes that will sit empty due to the sudden halt from the buyers end. This is bound to slow down the business.
Apart from this, they might be having other under-construction projects that will halt due to the sudden lack of two important things:
- Manpower: Due to the lockdown all gathering and places of work have been suspended which means that all on-site labour has come to a halt
- Raw materials: Raw materials used for building construction currently do not count as an essential which is why manufacturing has slowed down and so has the logistics. This, of course, means that construction sites are now defunct.
Due to the decreased site visits, a lot of real estates players are now focusing on virtual selling through videos, 3D renders, AR/VR
3. Impact on Commercial Work Spaces
Due to a lot of companies being asked to work-from-home, commercial spaces will see and sudden jolt in rent and occupancy.
A JJL’s report, titled COVID-19 Global Real Estate Implications said that – “Office utilisation rates will fall as remote working increases and landlords with exposure to short-term leases are the most vulnerable as the delay to investment activity and softer rental growth than previously forecast are headwinds to 2020 performance.”
This will also affect the short term contracts of co-working spaces.
4.Impact on Retail Spaces, Showrooms and Malls
Due to the lockdown, sudden anxiety amongst shoppers, and retail executives has made the footfall in retail spaces go down to almost zero. Will retail outlets survive this sudden halt of revenue is a question that is yet to be answered.
“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.
For now the game is just to wait out until the lockdown is relaxed and see if the retail spaces still have enough revenue juice in them to continue staying open.
There are the main dimensions of real estate that have been quickly affected by the spread of the Coronavirus in India.
We are yet to see a lot of situations pan out fully and see how they are handled by the government and regulatory authorities. Nevertheless, the long term effect of the Coronavirus on the economy will be quite evident.