Sectors such as real estate, organised retail and hospitality, which were already struggling due to economic slowdown, may take further hit if COVID-19 pandemic continues for a longer duration. The hospitality segment is already witnessing low occupancy rates. In the real estate sector, the government's advisory on restricting travel and social distancing could restrict further site visits by potential customers. Furthermore, the shut down of malls in different cities will affect the organised retail across the country.
It is also likely that many of the builders and developers might postpone the launches ahead. “The government advisory to maintain social distancing is impacting site visits and thus, housing sales. This impact is not restricted to just one segment but covers all budget categories, including the high-end segment. As is, housing sales in the luxury segment have been relatively slow over the last one year in comparison to affordable and mid-segment categories, which saw maximum demand and sales. At the same time, no budget segment will be immune to the fallout of the pandemic. High-end homes and home buyers usually prefer multiple site visits, so the need for social distancing will be a dampener,” said Anuj Puri, chairman of Anarock Property Consultants.
With financial markets tumbling to their lowest over rising fears of COVID-19, the overall sentiments are already low. The real estate businesses depends a lot on face-to-face meetings; so the restrictions on social distancing will definitely impact the consumer demand and sentiments. As a result, many developers are postponing their new launches or are having a "wait and watch" approach to see how the situation unfolds over the next month or two.
“Developers usually schedule project launches during the festivals of Gudi Padwa, Akshaya Tritiya and Ugadi. However, this year will certainly remain muted in terms of launches. Sales, too, will be dented due to the coronavirus fallout. Construction activity could also take a hit if the situation exacerbates and the government gives further directives,” remarked Puri.
Organised retail has come to a grinding halt in different cities due to rising COVID-19 cases in the country. The order on closure of malls and multiplexes across many top cities by the respective state governments, to prevent people congregating for any reason, has directly hit their businesses. “The top eight main cities of India have 126 malls, sprawling over more than 61 million square feet area. Out of these, more than 100 malls have multiplexes attached to them. Even short-term closures will have significant financial implications. What matters more is that these establishments attract massive footfalls. In a health crisis like the COVID-19 pandemic, shutting them down can be a major step forward in terms of harm prevention,” observed Anuj Kejriwal, MD and CEO of Anarock Retail.
Many experts have also pointed out that there can be temporary disruptions to the sector; but this may not hold back the economy and the industry in the long run. Though new launches will be put on hold in the real state estate sector, there might not be any immediate significant impact on investments into the sector.
"For the real estate industry, COVID-19 situation could prove to be an additional dampener in the short term as the sector is already under intense pressure because of the ongoing liquidity crunch and weak market sentiments. However, all these can be temporary and may not continue in the long run,” pointed out Anurag Mathur, CEO of Savills India.
Given the scenario, uncertainty still looms on the possible economic impact of the outbreak. Global supply chains have already been disrupted in the short term. At this stage, the UN estimates the trade impact of the epidemic for India is likely to be $348 million on the external front.
The real estate segment contributes significantly to India’s economic growth. Organised retail also faces challenges due to supply chain disruptions besides the closures. “The retail sector, too, will be challenged due to sourcing disruptions in the apparel, footwear and accessories space. Moreover, the slowdown is already being reflected in the delayed decisions by retailers to lease spaces. While the commercial sector has been on a strong foothold, investors and businesses will adopt a wait and watch approach that we are witnessing in other global markets,” said Samantak Das, Executive Director and Head of Research, REIS, JLL.
With the real estate, the hospitality segment is also expected to bear the brunt of COVID-19 effect. It is expected that business-wise, the likely impact on hospitality sector will be especially on luxury hotels as they have about 60-65 per cent foreign travellers of their total guest composition. Many foreign travellers are likely to cancel their trips. At the same time, mid-segment hotels that have many local tourists as their customers may also find it challenging as there are likely to be domestic travel restrictions.
“It is expected that the luxury hotel rates are likely to decline in the next two quarters due to a decrease in foreign tourists. A full rebound may take time but we could see some recovery signs in the third quarter depending on the wider situation. Mid-scale brands, on the other hand, derive more business from local tourists, but the next two quarters will be challenging for even them as domestic travel restrictions come into force. Occupancies will be hit for sure but given the fluidity of the global situation, assessing the impact is a challenging proposition,” said Jaideep Dang, managing director of Hotels and Hospitality Group, JLL.
