India's Real Estate Prices To Come Down Heavily As Virus Stalls Businesses

As the coronavirus pandemic has brought business activity to a standstill across the country, India's real estate sector is expected to witness a sharp correction in price for the first time in a decade.

"Property prices may come down by 10-20% across geographies, while land prices could see an even higher reduction of 30%," said Pankaj Kapoor, chief executive of real estate consultancy firm Liases Foras. He further added that such a correction has not been registered since the 2008 global financial crisis.

Even though shadow banking and lending crisis impacted the sector, prices remained steady in most of the markets ever since then. Nonetheless, things took a rough turn in the last one year as liquidity-crisis at NBFCs, which lend in a big way to both property developers and buyers, forced real estate developers to offer discounts to property buyers.

Now amid such a crisis, buyers can expect further deeper cuts in property rates.
Moreover, as per a report by PropTiger, an online real-estate portal, the situation that the sector faces is really worrisome with four-five years' of inventory across the country, which is an all time high. The unsold units across nine top residential markets in the country are worth about Rs. 6 trillion or $80 billion.

Amid it, banks are also concerned of rising bad loans from the sector if developers fail to liquidate their inventory. Even though government has extended its support in the last few quarters to ease the stress in the sector, some of the projects are still facing difficulties owing to lack of buyers or money.

Now the coronavirus pandemic paints an even more grim outlook for the sector as despite the 21 day lockdown, there has been seen a surge in coronavirus positive cases nearing 3000 and over 60 deaths.

The profits of most developers have already taken a beating, and there is no profit as such left in the system. Everyone is just trying to survive by maintaining their cash flows," said Ashok Mohanani, vice president of the real estate industry body NAREDCO in Maharashtra.

The effect shall be seen for both commercial and residential properties, he added.

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