Real Estate Investment Drops By Over 50 Percent In Q1 2020
The Institutional investment into India’s real estate sector declined sharply in the Q1 (January– March) 2020 period, dropping 58% year-on-year, as per a report by real estate consultancy firm JLL.
The 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 report titled ‘India Capital Markets Update – Real Estate Perspective Q1-2020’ released by global real Estate consultancy. The recent coronavirus outbreak was one of the biggest reasons for the decline, along with issues in the domestic banking and finance sectors in late 2019 and early 2020.
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 demonetization and a stricter housing law.
Lending to the real estate sector is now slowly picking up, although this pandemic can derail the trend. A reduction in NPA levels and capital support from the government to the commercial banks has led to the gradual revival.
The construction stage wise disbursal of home loans instalments to developers form a key source of finance. The 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. The recent liquidity injection by the Central Bank to the Banks and NBFC’s will also ease the liquidity crunch.