Home News Residential demand to fall by 60% in FY21: CRISIL

Residential demand to fall by 60% in FY21: CRISIL

Crisil expects demand for residential space to fall by 50-60% in FY21 as job insecurity will keep it in check. In the first quarter of the current financial year, demand and supply for residential space fell more than 80% as prices declined by 3-5% in the top six cities. However, substantial build-up of excess inventory is ruled out due to deferment of completion of under-construction projects and muted new launches.

According to Crisil who conducted a webinar recently, prices across affordable, mid and luxury segments could fall by 2-4%, 7-10% and 5-15% respectively. The webinar expects the developers to face challenges in raising new capital. Large players with strong balance sheet are likely to do better at the expense of smaller players. Due to large number of halted projects buyers will opt for reputed developers.

Even Niranjan Hiranandani, a leading real estate developer, expects the lack of demand and weak balance sheet of some developers would induce a price correction. Consolidation of the sector will also play out, given the distressed opportunities in the market, he felt. However, he is optimistic about the mid to long term prospects of the industry. He believes demand will pick up once a vaccine or an effective cure for COVID-19 is available.

However, the impact of COVID-led lockdown would not be severe on the commercial realty. In the short term, CRISIL expects the impact on office segment to be low as 35% of the space coming up for renewal is unlikely to face major challenges, given significant fit-out costs incurred and mark-to-market potential.

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