Pandemic to inflict more pain on commercial realty

New Delhi: The pandemic will inflict more pain on the real estate sector, especially the commercial segment. According to ICRA Ratings, there will be significant pressure on the commercial realty in the near term which will impact both office and retail leasing.

This comes at a time when a number of REITs have been in works for getting listed while there have been three of them that have been listed in the last couple of years. 

The second wave of deadly virus peaked in the first quarter of the current fiscal, posing similar challenges for the realty sector as in last financial year. The retail leasing, mostly in malls and high-streets, are directly dependent on the recovery in retail sales and discretionary spending. On the other hand, recovery in office leasing will be dependent on various factors like corporates evaluating the opportunities and threats posed by the pandemic on their realty resource planning.

"Though cash flows remained materially unimpacted in FY21, we are seeing increasing vacancy levels in the rated portfolio as the pandemic has resulted in deferment of new leasing transactions by tenants while the available inventory builds up in line with scheduled completions," said Shubham Jain, Group Head and SVP, Corporate Ratings, ICRA.