Home - Blogs

Impact of Covid-19 Second Wave on Real Estate
Impact of Covid-19 Second Wave on Real Estate

The persevering rise in COVID-19 cases and severe limitations in major metropolitan cities has blurred the standpoint of real estate, especially commercial properties that are feeling the heat of the developing work-from-home culture. 

Specialists say limitations in real estate markets like Maharashtra and NCR will postpone projects as numerous construction laborers have returned back to their towns, yet lessening supply may uphold property costs in the next many quarters. 

Low interest rates may urge individuals to purchase homes in low-density, plotted developments in gated colonies with shared and well managed infrastructure, however credit pressure among developers is required to proceed and distressed land may arise as a different category. 


Impact on Residential Real Estate 

Demand may recover quicker for affordable housing and mid-value homes, helped by the government’s credit-connected subsidy scheme it said. The government has extended the cutoff time for the advantages of the acquisition of affordable homes by one more year, to March 31, 2022. 

Demand is expected to rise in more smaller cities as work from home has urged individuals to purchase houses in or nearby their hometowns.

Deals had been restored before the finish of 2020 as buyers recovered confidence. "This has been on the back of low home loan interest rates, stale residential prices, lucrative installment plans and gifts from developers and government incentives like the decrease of stamp duty in states like Maharashtra and Karnataka.

However, the rising worries of the quick spread of the pandemic has constrained several state governments to lay and authorize tough lockdown-like limitations. While this is essential for breaking the chain, it is probably going to affect real estate business in the next few months.

In 2021, the housing demand is probably going to get back to 2019 levels however just if the effect of the second wave is definitely not drawn out for a long time, because in that case, jobs might be hit and that is probably going to affect the residential segment.


Impact on Commercial Real Estate

ICRA said the second wave of the pandemic may delay the recovery in new renting activities. The share of employees continuing to work from home may remain increased in the near term, due to the chances of health risks. "Without prompt availability on the bigger number of employees getting back to workplaces, potential renting deals may get postponed for a longer period than expected," it said. 

Before, decreasing contaminations alongside vaccination was expected to accelerate normal participation at workplaces, which would have increased renting deals. 

CARE Ratings said office rentals are probably going to be affected by the development of Blended Work from Home culture. 

The second wave will also affect the institutional flow of assets into commercial real estate. This will bring out the general sentiment in commercial office space being moderately quieted, Das told Moneycontrol.

Thinking about the current circumstance, the commercial net retention figures is relied upon to be 25 mn sq ft to 28 mn sq ft in 2021, down from prior assumptions for 30 mn sq ft to 32 mn sq ft in 2021. So, there will be a conclusive effect of this resurgence, Das said. 

Money related pain in the commercial sector is expected to increase. "This is as of now getting reflected in the estimating of the relative pricing of REITs in the market," clarifies Srivasttava. 

More companies may adopt a hybrid working model and include co-working spaces to give employees some flexibility. 

As corporate occupiers stay questionable about long term office renting plans in 2021 and 2022 and still re-evaluating their office space needs, they are exploring renting work areas in flexible workspaces to keep away from long term capital expenditures, and to get more flexibility on their rent terms, a report by Colliers said. 

Occupiers are expected to focus on portfolio streamlining through 2022 and investigate approaches to move teams into various, more smaller spaces than their current large, merged workplaces or utilize flexible workspaces as a temporary course of action until they migrate to altogether new workplaces, it said.

"Commercial Real Estate Developers also expected to include the flexi-space segment as a part of their product offering. Going ahead, they may also work out revenue sharing plans to co-working firms and go into equity driven, profit share or participation models," adds Srivasttava.