COVID-19 impact: Housing sales may fall 35% in 2020, demand for office space may shrink 30%

The impact of COVID-19 could result into a substantial decline across the real estate sector and the sale of residential houses could witness a 25-35% yearly drop in 2020 in seven major cities of India, including Bangalore, compared to last year, says a new report.

The nationwide lockdown has completely halted construction activity - project delays could run into several months for well-funded projects, and a couple of years for others. Nearly 4.66 lakh units across the top 7 cities earlier slated for completion in 2020 now face a high risk of delays, property consultant Anarock said in its report on Thursday.

Follow live updates of coronavirus here

According to the report, the affordable housing segment, which gained significant traction over the last few years, may also take a hit by COVID-19. With limited income and unemployment fears, buyers of affordable housing may defer purchase decisions, leading to an estimated 1-2% rise in unsold stock within this segment in 2020.

The sales of residential houses in 2019 stood at approximately 2.61 lakh units across the top 7 cities, which may fall between 1.70 lakh -1.96 lakh units.

Track state-wise confirmed coronavirus cases here

The new launches could also be impacted to the tune of up to 30% from 2.37 lakh units in 2019 to anywhere between 1.66 lakh -1.78 lakh units, according to the report.

Residential sales in the top seven cities, including Bangalore, have already dropped in the January-March quarter this year by 24% to 45,200 units compared to the same quarter last year.

"Unsold inventory in 2020 will largely remain stable, with a single-digit annual decline of around 1-3%. The nationwide lockdown has completely halted construction activity - project delays could run into several months for well-funded projects, and a couple of years for others. Nearly 4.66 lakh units across the top 7 cities earlier slated for completion in 2020 now face a high risk of delays," it further said.

COVID-19 has derailed the office segment's growth trajectory of the last three years, it said.

Current estimates suggest office supply will remain between 33-40 mn sq ft in 2020 as against nearly 47 mn square feet. in 2019 - a reduction of 15-30%. Net office absorption in 2020 is expected to drop to between 28-35 mn sqft from the last year’s 40 mn sq. ft. - a drop of 13-30%.