India's real estate sector is estimated to face losses of as much as Rs 1 lakh crore by the end of the current financial year (2020-21) due to the the COVID-19 pandemic, global professional services firm KPMG said in a report. The report, titled "COVID-19: React, adapt and recover - The new reality", suggests that the pandemic will dampen real estate activity in the next 6-12 months and things are likely to look up only after 18-24 months.
According to the KPMG report, in the residential sector, pre-COVID-19 challenges related to subdued demand and liquidity pressures will continue causing slowdown in sales in the short to medium term.
Credit crunch will lead to residential sales contraction, bringing down sales from 4 lakh units in 2019-20 to 2.8 lakh-3 lakh units in 2020-21 across top seven cities.
On the other hand, in the commercial sector, the IT and BPM sector is likely to continue driving demand for office space. Despite steady leasing in flexible workspaces across major Indian cities, the segment will face major headwinds over the next 9-12 months.
"Supporting the economic contribution through more than 250 industries, the real estate sector in India will be temporarily and ominously handicapped by the ongoing pandemic," the report said.
Over the next one year, the sector will have to revisit its planned developments, expansions, and investments, it added.
The ongoing financial problems and unprecedented global pandemic crisis have unsettled the investment climate and almost no industry is insulated from its impact, Chintan Patel, partner and leader for building, construction and real estate at KPMG in India said.
As far as revival in the sector is concerned, the report suggests that structural transformation will bring forth latent opportunities within untapped real estate segments such as data centres, integrated supply chains, warehousing, self-sustaining industrial parks, design efficiency processes social distancing and preventive hygiene cognizant commercial and hospitality spaces.