New Delhi, NFAPost: Amid projections of India’s economy taking a severe beating on account of the coronavirus-induced health and financial crisis, new launches and housing sales declined significantly in the country’s eight prime residential markets during the April-June period, a quarterly analysis by real estate brokerage firm PropTiger.com shows.
The report, however, indicates that the pandemic has spurred a big change as far as the closing of real estate transactions is concerned. More and more buyers switched to digital channels for their future purchases due to the lockdown amid real estate gaining prominence as a preferred asset class as huge volatility in other investment options, in the wake of the Covid-19 crisis.
The following cities were covered in the analysis: Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Delhi-NCR (Noida, Greater Noida, Gurugram, Ghaziabad and Faridabad), the MMR (Mumbai, Navi Mumbai, Thane) and Pune.
According to the report titled Real Insight: Q2 2020, housing sales in the three months period, with most of these cities in either a partial or full lockdown phase, dipped 79% over the same period last year. As against 92,764 units in Q2 2019, only 19,038 units were sold during April-June this year. Affordable housing (units priced up to Rs 45 lakh) continued to dominate the real-estate sector accounting for a 44% share of all sales.
Source: Real Insight: Q2, 2020
New Launches Declines
New launches also decreased significantly during this period as developers remained cautious during a period when commercial activity across sectors slowed down. The decline in launches continues the trend that we have seen over the last six quarters starting Q1’19.
Launches decreased 81% during the quarter ending June 30 to 12.564 units. The first half of this calendar year showed a similar declined with a 65% dip in new launches. Launches declined significantly across cities, especially in Mumbai, Pune, Kolkata and Chennai.
Housing.com, Makaan.com & PropTiger.com Group Chief Operating Officer Mani Rangarajan the current pandemic is an unprecedented Black Swan event that is expected to contract growth in the global economy, including that of India.
“As anticipated, demand was adversely impacted due to economic uncertainty combined with growing unemployment; in fact, our recent Housing-NAREDCO buyer survey indicated buyers have pushed back their purchasing decision upto a year. While, developers are increasingly offering schemes such as flexible payment plans, selective discounts and price protection plans to attract buyers, developers are understandably cautious and are focused on completing existing projects,” Housing.com, Makaan.com & PropTiger.com Group Chief Operating Officer Mani Rangarajan.
Housing.com, Makaan.com & PropTiger.com Group Chief Operating Officer Mani Rangarajan in fact, delivery of existing projects may get pushed back depending on how quickly supply-chain, labour availability and liquidity inflows are restored.
“We are unlikely to see new launches increase significantly for the next few quarters as developers wait for demand revival and augment their cash flows through sales of existing units. Notwithstanding these lackluster results, buyers continue to affirm their faith in real estate as an asset class with over a third of our surveyed buyers choosing it as their preferred form of investment” says Housing.com, Makaan.com & PropTiger.com Group Chief Operating Officer Mani Rangarajan
Housing.com, Makaan.com & PropTiger.com Group Chief Operating Officer Mani Rangarajan added on the positive side, the company is seeing increasing digitisation of real estate with significant growth in online demand and developers and buyers moving strongly along the adoption curve for products such as virtual tours, drone shoots, video calls, and online booking platforms.
“More than 90% of all real estate search and discovery has moved online. We may be seeing a significant shift in the real-estate sector where technology will play a significant role in the property renting and buying process and property registration may move online in some states. While physical site visits will remain important, buyers will use technology to discover new homes, experience virtual site visits with some buyers booking online. Given social distancing and the use of technology, buyers will likely make fewer site visits than before,” Housing.com, Makaan.com & PropTiger.com Group Chief Operating Officer Mani Rangarajan.
When compared to the levels seen during the same quarter last year, unsold stock declined 13% in the eight cities, primarily on account of a fall in new launches. As on June 30, 2020 developers had an inventory consisting of 738,335 units across these markets. At the end of Q2 2019, the unsold stock stood at 846,460 units.
At 56%, the Mumbai and Pune markets together contributed the highest share to this stock of unsold homes, followed by NCR (15%) and Bengaluru (10%).
Inventory overhang, however, has increased to 35 months as against 28 months last year. Inventory overhang is the time developers would take to sell off the unsold stock keeping in view the current sales velocity. At 53 months, the inventory overhang is the highest in the NCR market.
The report also notes that nearly 20% of the unsold inventory is in the ready-to-move-in category.
Prices remain stagnant
Due to the strain from the demand side, price growth in India’s prime residential markets remained largely muted, with the majority of cities showing an annual growth between 1-3% in the past one year. Housing markets of Hyderabad and Ahmedabad, however, showed comparatively stronger growth, primarily on account of end-user demand in specific locations. When compared to the level seen in Q2 2019, weighted average price increased by 7% and 6% in Hyderabad and Ahmedabad, respectively.
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