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Commercial versus residential real estate: Here is where you should invest post COVID-19

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Experts believe that if a vaccine is invented in FY21 then the commercial segment could see a steady demand but residential RE will likely to remain under-pressure. According to Cushman & Wakefield's report, commercial RE is not only one of the best performing sectors in the last 5-6 years, it is also the least impacted with rent collection at 90 percent for the lockdown. While, residential RE could take longer to emerge out of the woods.

Commercial versus residential real estate: Here is where you should invest post COVID-19
Indian real estate (RE) businesses have come to a halt due to COVID-19, especially the residential space. Experts believe that if a vaccine is invented in FY21 then the commercial segment could see a steady demand but the residential segment will continue to remain under pressure.
According to Cushman & Wakefield's report, commercial real estate is not only one of the best-performing sectors in the last 5-6 years, but it is also the least impacted with rent collection at 90 percent during the lockdown period.
The global commercial real estate services firm feels that once a vaccine is available in the market, there could be a 25-28 msf (metre square feet) absorption, with rentals at a steady pace.
Furthermore, it said that the commercial RE will see an upside as it expects only 10-12 percent jobs moving to WFH due to a lack of infrastructure in India. As a result, more office space per capita would be required, which might support overall demand.
In the case of retail and residential spaces, the report said that retail RE will further remain under-pressure as ~20-25 percent as the retail shopping experience is shifting online.
One space that could take longer to emerge out of the woods is residential RE, said Gulam Zia of Knight Frank. Lack of any government support remains a big drawback for the segment, he added.
Explaining further on the real estate space, he said that it is a labor-intensive industry, and the reverse migration will hit the space on a massive scale, and this should continue in the short-to-medium term.
In case of raw materials, he feels the supply side is already disrupted due to COVID-19 as well as the increased awareness towards a boycott of Chinese goods. Meanwhile, pricing will not decline as there's no room for it. However, a drop in prices will definitely bring back demand and ease the inventory hangover issue, he added.
Despite factoring all the negative future outcomes for the sector, the Nifty Realty index has surprisingly managed to surge 26 percent since its March lows.
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