Home sales in India's top eight cities was recorded at 94,997 units during H2 2020. As the country moved towards normality, residential sales reached almost 54% of the 2019 quarterly average with 33,403 units during Q3 2020 and recovered to almost 100% of pre-COVID levels at 61,593 units in Q4 2020, a new report by Knight Frank India has said.
Homes priced over Rs 50 lakh made up approximately 57% of the total sales during H2 2020. While new home launches were lower in H2 2020 by 23% YoY at 86,139 units, Q4 2020 witnessed significant growth of 77% QoQ at 55,033 units, it said.
New launches were also on the road to revival as most high-volume markets saw developers announcing new projects, since demand trends were seen to be highly encouraging. Both Mumbai and Pune saw an identical 121% QoQ rise in new launches. The leader on the board with over 480% QoQ rise was Hyderabad, the report said.
Launched on January 6, the India Real Estate: H2 2020 is the 14th edition of Knight Frank India’s flagship report, which presents a comprehensive analysis of the residential and office market performances across eight major cities for the July-December 2020 (H2 2020) period.
Mumbai and Pune markets led the revival with both sales as well as new launches recovering significantly in the second half of the year. While all India residential sales saw a quarter-on-quarter (QoQ) rise of 84%, Mumbai (193%) and Pune (143%) recorded higher than average QoQ growth.
This was mainly due to the Maharashtra state government’s initiative to reduce stamp duty by 300 basis points (BPS) for a limited period between September - December 2020 making home buying very attractive.
The second half of 2020 saw a residential sale revival due to certain specific reasons. Firstly, a correction in values made purchase of homes across all major markets highly attractive.
Large volume markets like Bengaluru, Mumbai and Pune saw year-on-year (YoY) revisions of 1%, 3% and 5% respectively. Secondly, home loan rates reduced to a multi decadal low which made fence sitters, especially those with sound financials, take advantage and make their purchase. Thirdly, as a direct result of the pandemic, the need and desire to own houses that took care of buyers’ requirements influenced purchase decisions.
The report revealed that sales in the over Rs 50 lakh category constituted 57% of all sales in H2 2020 showing a growth trend and leaving behind the affordable category at 43%, as buyers of the affordable category were far more impacted by the pandemic induced economic uncertainties.
Interestingly, this year saw a rise in transactions in the high-end category as buyers in that segment saw this as an opportune time to enter the market. Overall, buyers with strong financial fundamentals, with the capability of servicing long term debt, were seen making their house purchases during this period.
New launches were also on the road to revival as most high-volume markets saw developers announcing new projects, since demand trends were seen to be highly encouraging.
Both Mumbai and Pune saw an identical 121% QoQ rise in new launches. The leader on the board with over 480% QoQ rise was Hyderabad. With total launches across the country at 146,628 units, launches were lower by 34% YoY in 2020; and while unsold inventory levels improved, sluggish sales velocity in mid-2020 led Quarters to Sell (QTS) to rise to an average of 10.1 quarters.
“Despite the on-going pandemic, the H2 2020 sales growth in some cities is fairly encouraging. In Q3 2020, the real estate market started witnessing revival signs, further recording a significant improvement in home sales during Q4 2020. Of the total sales number in H2 2020, Mumbai and Pune contributed around 50% in home sales,” said Shishir Baijal, chairman and managing director, Knight Frank India.
“This marvellous performance can be largely attributed to the Maharashtra State Government’s decision of reducing the stamp duty. Other state governments need to follow suit and offer something similar to bolster demand across their markets,” he said.
“The RBI’s decision to maintain low repo rates has narrowed the margin between rent and home loan EMI paid to banks. Driving house purchase affordability to extremely attractive levels, it has emerged as a major growth driver for the housing sector,” he added.
Rajani Sinha, Chief Economist and National Director, Research, Knight Frank India said, “The rebound in residential sales in H2 2020, has been much stronger than what was anticipated few months back. Apart from pent-up demand, there has been a combination of factors like lower housing prices, attractive offers/ discounts by developers, multi-decade low interest rate, high household savings that has given a strong fillip to residential sales.“Government policy support like the stamp duty cut in case of Maharashtra has been a very supportive factor for the pick-up in residential sales in this region. Interestingly, the Maharashtra State Government’s revenue collection from registration has also picked up, implying that pick up in housing sales has more than compensated for the lower stamp duty,” she said.