COVID-19:Global Real Estate Implications
The outbreak of COVID-19 and its rapid spread across the globe has taken many by surprise, and businesses, communities and governments must now confront the reality of the seriousness of the situation. There is a wealth of information (and misinformation) to be consumed on a daily basis and, in such a fluid situation, the facts and consequences are changing quickly. While individuals and businesses remain focused on health and well-being, this article will highlight the potential implications for Real Estate.
The impact of the COVID-19 outbreak is being felt across all aspects of work and life. Understandably, the implications for each sector are quite specific and different. In exceptional circumstances, like the current environment, it is difficult to view the longer-term repercussions. However, we are assessing each sector for immediate impacts and will also unpack some of the less obvious longer-term effects.
Based on our assessment, we have sequenced the major property sectors to reflect the level of short-term risk, with hotels experiencing the most short-term volatility in performance and the living sectors being the most resilient.
Residential Multifamily Apartments, as an asset class, will remain resilient to the effects of the COVID-19 outbreak with its more stable, longer-term income profile and defensive investment characteristics. Where new housing supply is supported by investor purchases, there will be near-term demand uncertainty for locations that rely on international sales. Technology is an important mitigator and plans for new online transaction platforms will be accelerated in 2020.
Although it is relatively straightforward to assess the immediate and direct Real Estate Impact of COVID-19 – with an escalating number of event Cancellations,Office Closures,Travel Restrictions and quarantined areas – the indirect effects are yet to be fully realised. Cities and countries which have seen the highest number of cases will certainly feel the direct impacts the hardest, but all locations will experience the indirect effects, be it a reduction in tourism, breakages in supply chains or even changes to the way we all live and work.Earlier as well, the sector has shown resilience & successfully absorbed many shockwaves such as RERA, Demonetization, GST implementation, the NBFC crisis, etc. In the medium term, many investors & buyers might pivot to the sector in larger volumes, as Real Estate is believed to be a safe asset class to invest.
After the outbreak of the COVID, factories across the country have shut down, resulting in the collapse of manufacturing & export. The economic growth forecast has been revised to 2.9% from an earlier estimate of 4.8% for China by S&P. This might be an opportune time for Indian manufacturers & exporters to fill in the current gaps in the global trade flows. Through targeted efforts both from the public & the private organizations, the Indian manufacturing sector can be set for growth & enabled to deepen its foothold in the global supply chain. This will also help in economic growth in the country & positively impact the Real Estate demand.