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Incomplete malls, low consumer spending: Trends that may grip real estate sector amid coronavirus

FE Online
Real estate

A 21-day nationwide lockdown to contain the spread of novel coronavirus (COVID-19) pandemic impacted the India’s realty sector which was already grappling with project delays, liquidity crunch, regulatory changes, unsold inventory and weak sales for the past few years. In the usual times, during festivals like Navratri, Akshay Tritya, etc., the activities in residential real estate goes up, as new launches and housing sales witness upticks. Also, many home buyers make purchase decisions during summer vacations of their children. But the fast-spreading COVID-19 has halted all the development and construction activities across the country, impacting the housing sales.   

Apart from the residential segment, the commercial real estate sector has also been adversely hit. "Corporate occupiers are seen delaying their leasing decisions and still several MNCs and businesses are testing new waters of the work-from-home option. If proved successful, it could impact leasing activities in the future," ANAROCK said in its report named ‘Covid-19: Impact on the Indian real estate sector’.

Amidst this lockdown scenario, the consumer spending has plunged owing to factors such as muted buying and spending on recreation."Indians will be either locked down in homes or prohibited to congregate. In our opinion, consumer spending is likely to dip in the current year. Not only lockdowns and social distancing but also the overall economic gloom and employment uncertainty are likely to bear an impact on consumer spending," the report added.

Due to fear of this fast-spreading deadly disease, social distancing has become a new norm, because of which people, even after lockdown is over, will refrain from visiting malls, thereby leading to a further decline in consumer spending. "The planned new completions across the top 7 cities might drop to between 30%-50% overall in 2020 as there may be a minimal activity in H1 2020 and the subsequent second half may also remain fairly muted," the report highlighted with further possibility of delays in the new mall completion.

The report further explains the enormous pressure on the Indian retail sector as new completions will be deferred and leasing activities will be delayed. Once the lockdown is over, consumers may start to venture out gradually for purchasing necessities and as a result, "we may witness some amount of activity at the retail malls and other shopping destinations," the report read.