Real Estate Sector Contracts Due To COVID-19 Impact in FY21

Real Estate Sector Contracts Due To COVID-19 Impact in FY21
02/06/2021 , by , in News/Views

The construction and financial, and real estate and professional services sectors have shown a negative growth of 8.6 percent and 1.5 percent respectively between April 2020 and March 2021 due the impact of COVID-19, official data released by the National Statistical Office (NSO) showed on May 31.

The decline in GVA in construction and real estate activity was largely due to COVID-19 and along the expected lines. This is mainly because during the first wave in 2020 (since April), there was at least 75 percent drop in construction activity across the country. Developers remained more focussed on selling their ready stock rather than launching new projects

However, in Q3 and Q4 construction witnessed a rebound before the second wave of COVID-19. The construction sector saw a 14.5 percent growth in Q4 on a year-on-year basis.  This reflects a significant proportion of the government’s investment in infrastructure projects. The financial, real estate and professional services sector saw a growth of 5.4 percent in Q4 on a year-on-year basis.

“While the second wave of COVID is likely to impact these segments in Q1FY22, it is clear that removal of lockdowns and movement restrictions by June should help the economy pick up the lost growth momentum by Q2/Q3FY22 unless we see a threat of a third wave etc. We, therefore, continue to hold our forecast of 10.0 percent GDP growth for FY22,” said Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.

The construction sector has recorded a growth of 14.5 percent YoY which indicates the effect of government capital expenditure. What is pleasantly surprising is that the financial, real estate and other services also recorded a healthy growth of 5.4 percent in Q4FY21.

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