The upcoming festival season may just prove to be yet another dull event, say real estate experts. Festivals like Gudi Padwa, Ugadi, Akshaya Tritiya and Navratri are considered auspicious for launching new projects and even investing in real estate. However, the momentum of new launches is likely to slow down by 15 percent to 20 percent due to the coronavirus pandemic, the general slow economy and the pressure on liquidity
The momentum in the housing market, which began to demonstrate some traction over the past few quarters, would likely slow down again in the first half of 2020. Footfalls and site visits, too, are down by 25 percent, they say.
Most real estate developers Moneycontrol spoke to said that they would choose to defer new launches and wait to see how the situation unfolded over the next few months and would instead focus on completing ongoing projects.
Some are planning a digital launch. Vijay Khetan Group was planning to launch a new project in Andheri East. “Earlier there was to be a physical launch with channel partners and brokers. But now due to the Covid-19 situation, Vijay Khetan Group will be conducting a digital launch where it will accept requests from customers online. Customers will also be given time slots for site visits to avoid crowding,” a company spokesperson said.
Homebuyers are expected to delay in making decisions with regard to house purchase, say experts. Also, they expect the growth in the housing market to trail the broader market recovery by a couple of quarters.
“New project launches may see a dip of 15-20 percent dip this festive season,” said Pankaj Kapoor, the managing director at Liases Foras Real Estate Rating & Research, adding that sales, however, were expected to see an uptick due to the lower base in 2019.
Going by the impact on the share market, new real estate launches are also likely to get curtained going forward. A house purchase is directly related to economic growth.
“Since most people are not sure about their jobs, they may not decide to take on a liability of buying a house at this juncture,” he said.
Sentiments are currently subdued due to business disruption, meltdown in global and Indian equity markets, liquidity issues in a turbulent and risk-averse financial market, supply chain disruption across sectors and more than anything else, the uncertainty around the duration of its social and economic impact.
In the current environment, developers are likely to focus on selling existing inventory rather than launching new projects. The only exceptions to this could be projects which are already in the soft-launch stage and have already seen a fair amount of marketing spend, said Aashish Agarwal, Senior Director & Head - Consulting Services at Colliers International India.
“Needless to say, the impact of the corona virus is being felt across sectors and real estate will be no different. The government advisory to avoid much social activity is certainly going to impact site visits and thus housing sales. In addition, many developers have also postponed their new launches and will wait to see how the situation unfolds over the next month or more,” said Anuj Puri, Chairman - Anarock Property Consultants.
The construction activity could also take a hit if the situation does not see a solution soon and goes beyond control. Given that developers always schedule project launches during the upcoming festivals – Gudi Padwa and Akshaya Tritiya - it will certainly remain muted in 2020.
All housing segments expected to be hit
The impact of the coronavirus pandemic and the general slow economy is expected to be felt across segments but the affordable housing segment is expected to be more resilient.
“While both segments are end-user driven, mid-segment buyers will not be comfortable committing to large investments and liabilities in times of economic turmoil. Recovery in the mid-segment is likely only with improvement in the hiring outlook, which is tied to the uncertainty of the virus outbreak. However, the target buyer group of the affordable housing segment is less exposed to cyclical job volatility and usually comprises multiple-income households,” said Agarwal.
With the added incentive of tax benefits, the activity in the affordable housing segment is likely to be relatively stable, though both volumes and velocity will be negatively impacted till the situation stabilizes, he said.
The real estate market is facing an oversupply situation. New launches definitely do not make sense at this point in time. Having said that, if affordable housing is available at an attractive price point, demand will continue to exist for the category given the government incentives that come with it, said Anckur Srivasttava of GenReal Advisers.
Footfalls down by 25 percent
Since the short-term impact has been on fewer people venturing out of their homes to visit construction sites or sign up for new house purchases, footfalls at real estate offices too have come down by 25-30 percent.
“This is an expected outcome and is likely to have a short term impact. The number of homebuyers visiting sites or realtor offices has come down by 25-30 percent,” said Gaurav Gupta, President - Credai Ghaziabad.
Also, instead of launching new projects, realtors are focusing on completing existing ones, he told Moneycontrol.
“There is definitely a slowdown in terms of walk-ins. Homebuyers are also delaying negotiations. The overall sentiment is that of caution. They are pushing back decisions by two to three weeks. Most potential buyers are deferring their decisions, to visit the site office and to have face-to-face meetings,” said Samantak Das, Executive Director and Head of Research, REIS, JLL.
Can we expect these ‘deferred’ launches to happen during Diwali?
New launches planned during the auspicious period of the upcoming festivals in late March and April will certainly be deferred by developers across cities. They will wait and watch the situation - and if all is well, “may re-consider launching these projects during Dussehra and Diwali,” added Puri.