Coronavirus pandemic: New housing launches may slow down by 15% this festive season

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.