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Coronavirus overhang: Impact on real estate market in India to be limited

Chinese are the biggest cross-border lifestyle property buyers, especially in Europe and North America


The coronavirus, which has spread to 73 countries, including India, and has sickened more than 90,000 people, is making the global luxury property market jittery.

But in India, the overall impact will be limited unless the outbreak lasts long. According to a report by CBRE, there has been no material impact thus far on the retail market. “Both physical retail and online retail continue to witness growth in key retail markets as more global retail brands enter and expand,” it says in its report Why the Corona Virus Outbreak Could Have a Lasting Impact on Asia-Pacific Real Estate.

The office-leasing demand, too, has been unaffected. “Robust leasing continues to be supported by an improvement in domestic economic sentiment and sustained appetite among US and other EU-based corporates for outsourcing their business operations to India,” says the report.

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On the industrial and logistics sector, the outbreak is unlikely to have a major impact, too. The logistics sector has been witnessing robust growth due to supply-side incentives and promotion from the government and demand from local and global 3PLs, e-commerce firms.

“Manufacturing could be affected, as China is India’s largest trading partner. A serious disruption of supply-chain linkages might force traders to look for alternate markets for sourcing both raw materials as well as finished products which will impact costs,” the CBRE report says.

The China factor

But the same can’t be said of global luxury real-estate market. International property consultants are worried that there may be a short-term impact, as Chinese are the biggest buyers of such properties across the world, especially in Europe and North America.

China, from where the virus originated, has been the worst hit, though infections seem to be slowing.

“Wealthy Chinese buyers are the largest purchasers of luxury lifestyle properties, especially branded residences, across Europe and the US. The top-end of the market may be expected to soften as a result at least for the short term,” Rod Taylor, director, International Residential Developments, Global Residential, Savills, told Moneycontrol.

In the short term, buyers have less incentive to purchase if it’s unclear when they’ll get to visit the property. In the long term, the virus could temporarily weaken sales if the problems persist, say realty consultants.

“The Chinese community buys homes across Europe. Chinese are very active property buyers in Cyprus, Lisbon, Portugal, Italy, London and even Germany. Lifestyle and property appreciation is the main motivation for the Chinese to buy second homes in these markets. They are largely lifestyle buyers and collect properties the way they would collect pieces of art or even vintage cars. Properties are like trophies that they would want as part of their collection,” Taylor said.

Also, if one were to compare the Chinese community with the Indians, the Chinese are faster at making property decision when compared to Indians, who tend to be conservative.

“A Chinese buyer is more likely to make a decision over the phone. Therefore, the coronavirus may have an impact on the economy and activity in the lifestyle property market may take a hit in the short term,” he said.

Since there were travel curbs, there would be fewer property roadshows in China over the next six months and impact the property market, he said.

The fixture fix

Indian realtors, however, are of the view that the virus may not have a major impact on the domestic real-estate market. The impact may be restricted to high-end luxury real estate that relies heavily on import of fixtures and furniture from China.

“Imports from China have slowed down as a result of the unprecedented situation arising from the coronavirus pandemic. When we look at possession dates as also the ongoing interior work in the luxury real estate segment, these are definitely going to be delayed. Supply of fixtures, furniture and fittings used in luxury housing in India is also imported from China and will be impacted,” said Niranjan Hiranandani, president (National) NAREDCO as also President, ASSOCHAM.

Also, there were no alternative sourcing options for the fixtures, furniture and fittings at the price contracted with Chinese manufacturers, he added.

“The impact of the virus is difficult to estimate. It’s not clear how it will play out in the long run but something we will have to keep a watch on the overall macro level,” Mohit Malhotra, managing director and CEO at Godrej Properties Limited, said.

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First Published on Mar 3, 2020 02:49 pm
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