Understanding Impact of Covid 19 on Commercial Real Estate Market in Delhi
We’re in the middle of the Coronavirus COVID-19 pandemic.
The national lockdown to curb the spread of the novel coronavirus pandemic has stalled all businesses in India, barring essential services. And activity in the real estate sector—among the top contributors to the nation’s economic growth—has halted ever since 1.3 billion people went under severe restrictions since March 24. The first quarter of 2020 with the advent of Covid-19 crisis has forced developers to delay signing agreements due to uncertain economic environment. As evident in South Delhi, Project sites are shut, sites visits have stopped, and construction activity has come to a grinding halt, eventually impacting Commercial real estate market.
With most companies and organizations proceeding to implement policies of ‘no face to face meetings’ and ‘no visitors’, the real estate market has been affected.
The commercial real estate which till now, has been the jewel in the crown’ of real estate is bound to face repercussions too due to these measures, as it is a slow mover. If Coronavirus keeps impacting the economic supply chains for longer terms than expected, it is a possibility that commercial investment decisions may stray from real estate. Corporate occupiers would postpone taking up spaces till the time the current scenario becomes clear and is under control.
While the sector was on a growth trajectory since the few years and was likely to emerge stronger than before, the current coronavirus lockdown has surely put brakes on its growth momentum. Industry estimates of the Indian real estate market, prior to Covid 19 out break, were projected to be USD 650 Bn by 2025 and USD 1,000Bn by 2030.This seems tough amidst the current Situation.
Dr property believe that sales in 2020 might be significantly hit due to the current COVID-19 outbreak in India. Many investors will consider postponing their decision either to stay away from the project sites or in the expectation of a price correction.
Now let’s understand impact of lockdown on commercial Real estate market in Delhi.
Impact of Corona on Commercial Real Estate Market in Delhi
- Indian property market will become more attractive to Individual NRIs for investment purpose.
- ‘Office Spaces’ may become the most ‘stable’ property investment in India.
- Commercial real estate will become more preferable than residential real estate owing to current demand & supply balance, and higher expected ROI available from commercial properties.
- To ensure ‘social distancing’, many start-ups & new companies will prefer small offices compared to co-working space in the medium term.
- Pre-leased sale transactions might become difficult to conclude as many tenants will re-negotiate their rentals with the owners, negatively affecting the sale price of the property in the short term.
- Investors will sell residential property investments to buy commercial properties in expectation of better returns.
- Banks are expected to lose their reputation as ‘most stable’ tenant for commercial properties.
- Retail mall projects will be delayed as sourcing for fixtures & fittings is mostly imported from China, resulting in lag in final completion of projects.
- Rentals for restaurant properties will fall, as they will lose revenues owing to social distancing measures.
- Buyers will prefer to buy small offices near their residences, for rental income stream in the short term and for possible future use in the long term. As a result, commercial office spaces available near residential areas like Nehru Place, Kidwai Nagar will attract investors.
Indian commercial real estate market has very limited exposure to China but US & Indian firms accounts for 80% of total absorption of mn sq. ft in 2019. And a slowdown in these economies could lead to slow decision making, pruned capital expenditure, thereby resulting in delayed portfolio decisions.
So far, Commercial market has been the shining star in India’s real estate market with Delhi being the second highest, after Bengaluru, in terms of leased office space absorption rate. However, post Corona, it is expected to slow down as any companies will post pone their expansion plans owing to uncertain global market.
Indian real estate sector needs to exhibit immense resilience to overcome the current situation imposed by the Convid-19. However ,there surely lies an opportunity in every crisis and Dr property believe that the Real Estate sector might embark on a different growth trajectory in the year to come with the emergence of business with sustainable business models and strong foothold on technology.
Dr Property, being a pioneer player in Real Estate has adapted to current scenario and is now available over ZOOM , so that we can show you the property, or else discuss about best location for your commercial as well as residential properties in south Delhi maintaining social distancing code.
Extraordinary times require extraordinary measures.
Stay home, Stay safe!