Real estate sector may be the worst hit due to the countrywide lockdown announced by the Prime Minister. The sector is already reeling under demand slowdown since last 3-4 years which has been exacerbated by some government decisions like demonetisation and introduction of RERA and GST. However, government’s decision to go for complete lockdown for three weeks will not only delay the recovery of the sector but also may further worsen the condition, especially of the residential sector.
According to a leading real estate consultant, more than one million residential units may get stuck across India due to complete lockdown of the nation. It may be noted that nearly 35% of housing units under construction are already stuck due to various reasons like liquidity crisis faced by the builders, now the prolonged lockdown may bring the construction work at rest of the sites too to grinding halt. This may impact the project execution schedule as well as their cost and may put extra burden on the beleaguered builders. On the other hand, it may also result in reduced unsold inventories in the medium term. But sooner or later, unexecuted units too will get added to the inventory levels unless the demand situation improves drastically.
NCR may see the highest number of stalled units followed by Mumbai region. In fact, NCR may account for more than 40% of the stalled units while Mumbai may account for another 20% of the stalled units. Meanwhile, Pune is having one of the best absorption rates and developers there are now little anxious due to lockdown.
Though the commercial sector had good run in recent years despite the poor show of residential sector, this year may not be a smooth one for them too. Continued lockdown and liquidity crisis followed by anticipated global recession may have impact on the rentals. It may be a hard bargain on both the sides. Also, most of the projects are likely to face time overruns as the construction workers have already deserted the sites.