08/05/2020
Covid19 impact on Real estate sector:
1)Residential real estate:
Demand for residential real estate is intact.
Demand Influencing factors:
- Low interest rates at around 7% and related tax benefits.
- Supply shortage of Ready to Move quality apartments considering annual demand of 250000 units across 7 major cities.
- Emphasis on Health and Hygiene.
- Quality homes to facilitate WFH.
- Investment with stable returns unlike volatility in capital markets.
Headwinds:
- Migrant labor issues resulting in delay in ex*****on.
- Economic uncertainty resulting in project deferrals.
- Liquidity constraints with banks reluctance to lend to Real esate sector.
These headwinds will further delay ex*****on of projects and will create huge demand of Ready to Move flats.
Sector will see pain in short term in ex*****on for 6-9months , but as economy revives will create huge demand in Medium to Long term.
2) Commercial Real Estate:
Office space:
Many fear that WFH will curtail demand for office space, though not true. Considering current Pandemic, WFH is need of the hour.
But as humans are social animals, won't prefer to spend their full time in life in just closed walls of their living space.
Assuming 30 to 50 percent employees will WFH on rotation basis, office space demand will continue to rise considering covid19 protocols.
Currently office desk space is around 50sft and should be increased to 100 to 125sft per desk to maintain social distance vas part of COVID19 Office protocols.
With this, even if 60% employees WFH, office space demand is still intact and any further expansion will create additional demand for office space.
India as low cost destination with huge human resource capital, will continue to be offshore destination.
Coliving:
With increased emphasis for health and hygiene, coliving offers huge growth potential as many will move from PG's to organized coliving spaces with options to collaborate, communicate and connect with quality living standards.
Around 55lac students d graduates relocate to cities every year offering huge potential for Coliving spaces.
As WFH is offered on rotation, we don't see any reverse migration from tier-1 cities vwhich will continue to create demand for Coliving.
Coworking:
WFH on rotation will be new phenomenon.
But considering constrained life in living spaces, people prefer to work near home in Coworking flexible spaces.
Even corporates will prefer to function in Hub and Spoke model creating demand for Flexible spaces which are cost effective.
But with reduced foot falls now, flexible spaces will have short term pains and we see consolidation in Coworking players.
3) Logistics and warehousing:
Disruption is supply chains during Covid19 lockdown and increased consumer preferences for E-commerce will create additional demand for Warehouses and Cold storages in City suburban areas.
Summary:
Pain will be noticed in short term for 6-9 months.
But demand will improve over medium to long term as Economy recovers.
