Business

Real estate sector likely to suffer big jolt

‘New sales may be hit badly amid surge in loan defaults and cash constraints’

The spread of COVID-19 in India and the resultant restrictions imposed by government authorities to contain it is expected to impact the real estate sector significantly, say developers and analysts.

“In the mid-term, it is expected that new sales will be badly impacted and there will be a surge in default by customers. This will certainly have a cascading effect on the repayment of loans availed by customers and developers,” said Sanjay Daga, chief operating officer, Runwal Developers.

He said developers would face the daunting task of servicing interest outflows amid constrained cash inflows, postponement of instalments and interest subsidy. “There is a lot of volatility expected in the market resulting in job losses and sustainability of businesses will be at stake,” he said.

‘Too early to predict’

“While it is too early and difficult to predict the exact impact on the realty market, we need to wait for the full economic cycle and implications that come along with it in the coming months,” he added. Farshid Cooper, MD of Spenta Corporation, said the disruptions in the business cycle are bound to impact the demand for commercial as well as residential real estate.

“People are avoiding stepping out of homes and hence there is a dip in walk-ins across all residential projects too. Investors, as well as end-users, are opting for a ‘wait and watch’ policy amid the pandemic,” he said.

Ashok Mohanani, chairman, Ekta World and vice-president, Naredco Maharashtra, said, “The momentum in the housing market, which had begun to show some potential over the past few quarters, would likely slow down in the first half of 2020. There is definitely a fall in site visits by potential homebuyers. This, in turn, will have a cascading effect on sales of property.”

Commenting on the issue Niranjan Hiranandani, national president, Naredco, said, “The pandemic menace has hit at a particularly sensitive time, that of the financial year closing. Across real estate companies, this is the time when statutory pay-outs and streamlining of balance sheets happen.”

He said this year’s festive occasion of Gudi Padwa/Ugadi might see a drop in launches and delayed deal closures, following a direct effect on site visits by potential buyers.

“When it comes to commercial real estate, the impact of COVID-19 in form of shutdown of retail outlets and malls as also entertainment and fitness centers has put commercial real estate deals on ‘wait and watch mode,” he added.

Anurag Mathur, CEO, Savills India said for the real estate industry, COVID-19 could prove to be an additional dampener in the short term as the sector is already under intense pressure because of the ongoing liquidity crunch and weak market sentiment.

“However, it is important to note that these are temporary disruptions and would not hold back the economy and the industry in the long run. We do not see any significant impact on investments into the sector in the long run because of the pandemic,” he added.

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Printable version | Mar 30, 2020 12:35:21 PM | https://www.thehindu.com/business/real-estate-sector-likely-to-suffer-big-jolt/article31111338.ece

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