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Total investments in FY 2019-20 fell to its lowest in four years, declining by 13% to $4,261 million over previous year levels of $4,780 mn, according to the ‘India Capital Markets Update – Real Estate Perspective Q1-2020’ report.
The recent Covid-19 outbreak was one of the biggest reasons for the decline, the report highlighted, along with high-profile issues in the domestic banking and finance sectors in late 2019 and early 2020.
“The impact of Covid-19 virus has been unthinkable in its scope. Investors are expected to remain in a wait-and-watch mode, with caution and risk aversion is expected to drive the dominant behavior of institutional real estate investors over next few quarters. The year 2020 will be one of redemption, as the world recovers from one of its most challenging periods in recent history,” said Ramesh Nair, CEO and Country Head, JLL India.
India’s office space saw an increase in investments, rising from $1.8 billion in FY 2018-19 to $2.9 billion in FY 2019-20.
The real estate sector has been facing a liquidity crunch following defaults by IL&FS Group in 2018, leading to a pile-up of unsold apartments. That, coupled with an economic slowdown, stalled a nascent recovery in the disruption caused by Prime Minister Modi’s cash ban and a stricter housing law.
Lending to the real estate sector is now slowly picking up. A reduction in NPA levels and capital support from the government to the commercial banks has led to the gradual revival.
The state of residential real estate in India is the barometer of the realty sector’s health, accounting for the major share of its construction value. The construction stage wise disbursal of home loans installments to developers form a key source of finance.
The report showed home loans disbursals grew by $24.6 bn while net credit disbursal to real estate developers rose by $3.5 during FY 2019-20. The trend in home loan growth by commercial banks, hence, forms a major source of credit for the residential sector developers.
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