Does Omicron Pose A Threat To Indian Real Estate?

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Does Omicron Pose A Threat To Indian Real Estate?


Experts say that while it is too early to predict what the implications of the yet-evolving variant would be, the impact on the real estate sector will be dependent on the severity of the situation and whether a blanket lockdown is eventually imposed or a calibrated one.

"The year 2021 was quite eventful for the real estate sector despite the challenges posed by Covid-19 induced issues. If there is one thing we can take away from this year, it would be that the Indian real estate sector is quite resilient and despite all the factors that had, on several occasions, dipped the sentiments, the sector still sees a very promising future and tremendous growth potential in 2022,” avers Ashish Narain Agarwal, Founder & CEO of new-age brokerage firm

In an interview to BusinessLine, Mathur talks about the likely impact of Omicron on the real estate sector in 2022, outlook for the year and rising demand for alternative asset classes

“At this time, there is no immediate threat for the residential or commercial sector. However, the situation will be clearer in the next few weeks. In case a third wave becomes imminent, there will be some disruption for a period of a few months in 2022,” he added

Commercial real estate trend

Despite work from home raising questions on demand for office spaces, 2021 performed better than 2020 in terms of leasing and absorption. The year 2022 also seems to be a strong year if the leasing pipeline is taken into consideration.

We have not seen any cancellation of leasing commitments, nor have renewals stopped so far. In 2020, there was a significant increase in downsizing and cancellation of renewals. But none after the more disruptive second wave we saw last year. In fact, leasing picked up.

However, there could be some delay in signing of agreements and that too because the number of infections are high. So there can be delays of a month-or-so; but probabilities of cancellations are extremely low.

Also, people have started factoring in these infection waves when they look at back-to-work policies. Take the instance of some of the developed countries in the West. Despite high infections, they are calling these endemic, and have continued business as usual with minimum curbs and disruptions. We could also be looking at a similar situation going forward.

"The general belief is that with the level of vaccination and other learnings the country had during the past two waves would help us to deal with the situation better if any outbreak happens,” said Subhankar Mitra, managing director, advisory services (India) at commercial real estate brokerage Colliers.

Has commercial real estate come back to pre-Covid levels?

Not yet. If 2019 levels are considered to be the parameter, then leasing and rental activity will reach those levels towards 2023 or 2024. The 2020 disruption on the sector was quite severe – worker migrations, financing issues, hospitalizations – which led to slowdown in project deliveries, lesser supplies and even cancellation in renewals and contracts.

The real estate sector is witnessing growth and long-term prospects look intact. Commercial space or office space will continue to see high interest as Grade-A supplies improve; warehousing and data centers are the next most popular asset class followed by residential.

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