3rd Floor 310 - 314, Good Earth Business Bay, Sector 58, Golf Course Extension Gurgaon, Haryana 122102.
COVID 19 has adversely affected economic activities across all industries around the world. The complete picture is still to unravel, yet current outlooks on certain segments do look bleak. Here is BlackBricks take on current scenario on Real Estate in Gurgaon
Retail Spaces – Clearly the most negatively affected segment is Retail shops/ showrooms in Gurgaon. Since the complete lockdown was announced, non-essential retail outlets have been shut down till further notice. This has, in turn, forced many retailers to renegotiate their lease terms with their landlords. Many retailers are using the force- majeure clause in denying the complete rent. Some are converting the Fixed Rentals Agreement to Revenue Share Arrangement, bringing the Landlord to share the risk for the next 3 to 4 quarters.
Co-Working Spaces – The co-working segment was the blue-eyed boy in Realty for the past 3 years. Unfortunately, the current scenario is quite despondent. Most corporates are focussing on sustainability and cost-cutting measures. With no long term agreements and with a short notice period, Co-working Operators have seen a dramatic downfall of more than 30% in Revenues. All future expansion plans have been put on hold.
Under – Construction Properties – The exodus of the diaspora of labor needed for construction, may have a long term impact, as many might not return to the construction sites after the Lockdown is over and set up means of livelihood at their hometowns. An approximate delay of 1- 1.5 years in “Handing over Possession” is expected. This along with the added interest rates of loans will increase the cost of construction by 10 – 15% and also the Purchasing Cost for the Property Buyer.
Industrial Properties – With Indian GDP at the lowest in the last 15 years, most expansion plans have been put on hold. Demand is expected to weak for the next two quarters.
Residential Properties – Residential Market has been an “End – User” market for the past few years. With approx. 50% inventory still unsold in Gurgaon, this could be a blessing in disguise for home buyers. With Banks offering low-interest rates and disequilibrium in demand and supply of residential units bringing strong negotiation power favoring the buyer this might be an ideal time to purchase a home.
Commercial Office / Pre -Rented Investments – With Corporates still shelling out rentals, this category seems less impacted. The landlords are still receiving rental cash flows and most medium and large enterprises have deep pockets to weather the storm.
All future expansion plans have been brought to a halt. For many landlords who have pending loans against properties, deferring of rent returns has brought liquidity crunch thereby impacting the EMI’s. Co-living spaces such as OYO have stopped shelling out rentals to their landlords. Even though the Government is likely to announce policies to boost Real Estate Sector soon, it is evident that Realty is headed for rough times but even the worst scenarios present itself with opportunities. Ready to move in Residential Housing Units and Rented Office Space units are the categories we are banking on and so should you.