The report by India Ratings said that the commercial office segment is likely to be least affected in the near term, given the stability of cash flows underpinned by long-term leases with strong counterparties as well as access to capital.
According to the report, if the lockdown gets prolonged and pandemic worsens, then the mall owners will have limited flexibility to withstand the revenue pressure due to renegotiations/ declining consumption and/or non-payment risks from a bulk of tenants; thus increasing the refinancing/ liquidity risk for financial year 2020-21.
“India Ratings and Research believes that retail malls would see a temporary erosion of 10-12 per cent year-on-year of their rental income – the part tied to the mall’s consumption levels, given the temporary closure of malls and heightened risk of reduced footfalls and discretionary consumptions spend in the remainder of fiscal year 2020-21 as well,” it said.
India Ratings and Research said it believes the overall residential demand would fall by 7-10 percent in fiscal 2019-20Y20 and 10-15 year-on-year in 2020-21 across the top six cities in the country, in the event the coronavirus-led lockdowns and/or other social distancing measures last up to next two-three months.
India Ratings further noted the demand for office space may moderate in the near term, as businesses across the world including India is likely to feel the impact of COVID-19 led economic slowdown and may re-evaluate their expansion/space addition plan.