With the novel Coronavirus beginning to takes its toll on India, the real estate sector might be in for a bigger and more devastating impact on its growth than what was estimated earlier. With stringent restrictions on movement, the real estate industry is facing a decline across the board. The various ways in which the COVID-19 outbreak is hampering Indian real estate are detailed below.
- Impact on The Construction Sector
The vast majority of materials used for construction in India today are imported from China. Everything from construction equipment, solar panels, iron, steel and electronic parts all come from China. China is also the largest producer of steel in the world, and although India is second on the list, its production capacity is only a fraction of China’s. This, in turn, means that India ends up importing a lot of steel for construction purposes from China. The fact that steel prices have gone up tremendously as a result of China’s decreased output over the past few months, will also take a toll on the Indian real estate industry.
- Impact On Commercial & Retail Real Estate
Despite the impact of the novel Coronavirus on the Indian economy and populace being far less in comparison with most of the world, the virus hasn’t shown any signs of slowing down yet. Real estate experts reckon this will have an indirect impact on the commercial and retail aspects of the real estate industry in India. It is estimated that the COVID-19 outbreak could slow down the office space segment of the Indian commercial real estate market significantly in the first quarter of 2020.
Because of the drastic effects that this pandemic has had on the hospitality and retail industries in India, the need for shopping malls, retail spaces, and hotel establishment has also suffered. Malls across the country have shut down and hotels also have witnessed a sharp decline in bookings, because such places are marked as potential hotspots for the spread of the novel Coronavirus. With the spotlight on the lack of hygiene in workplaces and remote working measures, the need for commercial office spaces is only going to decrease.
- Impact on Real Estate Investment Trusts
All pre-ordained financing and fundraising ventures carried out via REITs or Real Estate Investment Trusts in 2020 will also be subject to numerous roadblocks as a result of the recent pandemic. Until and unless the pandemic shows clear and definite signs of subsiding, all REIT activities will be put on hold. As a direct consequence, investors could either begin pulling completely out or seek the adjustment of the value of these REITs. While some real estate analysts predict that such global disturbances of the magnitude of the novel Coronavirus might result in some profits for new REITs that are slated to be instituted in 2020, the overall consensus seems to be that most REIT financing ventures will take a hit.
- Impact on Real Estate Stocks
Numerous prominent market analysts suggest that the pandemic has cleared close to a third of the entire worldwide market cap. Stock markets the world over are collapsing and the effects of this are being felt even by third-world countries. With the Dow Jones dropping by close to a whopping thirteen percent, in lieu of the coronavirus pandemic, an impending recession, and global depression is anticipated.
The BSE (Bombay Stock Exchange) and the NSE (National Stock Exchange) dropped by 1836 and 494 points respectively in just one day in mid-March. This basically adds up to market losses of at least hundreds if not thousands of crores. Almost every industry and every segment of the Indian economy, including the Real estate sector has been impacted as a consequence.
As the menacing COVID-19 virus looms large over all day-to-day, social, and economic aspects of human life, the real estate industry not just in India but across the globe is sure to bear its share of the brunt. Albeit, this is not the first time that the world has faced such a crisis (although not of this magnitude). The SARS virus, the H1N1 virus, bird flu all took their toll on the real estate sector, but it bounced back harder. This is guaranteed to be the case this time around as well.
