House of Cards

The liquidity crisis of 2018 left the real estate sector floundering. Will Covid-19 be the last straw on the sector’s back?

- Pooja Sarkar

It was February 2010. The Indian real estate community had congregated at The Atlantis in Dubai for the annual meet of the Confederation of Real Estate Developers’ Association of India (CREDAI). The champagne flowed, people partied, dinners followed at the Burj Khalifa. It was just two years after the global financial crisis and developers thought they were back with a bang. They went on to raise prices, offer fancy loan schemes and build massive malls and commercial buildings. But over the last decade, the sector has crumbled and now the Covid-19 outbreak has left them gasping for air.

One look at promotional text messages from residential real estate developers reveals how prices are moving in the sector across the country. A developer who was offering its 1 BHK at a starting price of ₹63 lakh in the central suburbs of Mumbai in January had repriced it to ₹51 lakh in the last week of April. In the times to come, residential prices will fall further, say industry experts.

“We see weakness in new bookings for FY21 due to deferral in purchases, and we also see a higher risk of cancellations in the near term for bookings done in the near past,” says Mohit Agrawal, research analyst, IIFL Institutional Equity Research. He adds, “Our base-case assumptions have seen a 40-60 percent decline in new bookings, including a nearly 10 percent reduction in property prices over FY21, with a gradual recovery over FY23 and beyond.”