Housing sales in Delhi NCR dip by half year-on-year in 2020 compared to 2019: report

“Though the buyer has started taking decisions, he is still very risk averse at present. A perceptional trust deficit is playing on the buyer psyche. The disruptions caused by the Covid-19 pandemic has made homebuyers reassess their preferences with regard to home purchases. Homebuyers are placing their trust only in projects from developers with a strong brand equity and good record of project delivery despite volatile market cycles,” said Mudassir Zaidi Executive Director – North, Knight Frank India.

In the new normal, enquiries for bigger homes to accommodate work from home and online classes have been going up.

The Special Window for Affordable and Mid Income Housing (SWAMIH) Investment Fund I has approved funding for housing projects in need of last mile funding. As part of this funding, 6 of the 18 projects that have received final clearance are in the NCR region; disbursement is currently awaited. This is a positive step by the government to help with completion of stressed residential projects, he added.

Sales decline by 50% but pent up demand, festive season drive sales in third and fourth quarters

With the phase wise unlocking in the second half of the year, serious homebuyers are back in the market hunting for deals. In 2020, 21,234 units were sold in NCR’s primary residential market. While this represents a 50% decline over 2019, sales started picking up momentum from Q3 2020.

This is largely due to pent-up demand during the lockdown converting into sales bookings for developers, as site visits resumed in the second half of the year. In Q3 2020, sales had recovered to 57% of 2019’s quarterly average, which further increased to 90% in Q4 2020 indicating a strong demand comeback.

The surprise sales recovery in the last quarter of 2020 was on the back of the festive season, families looking for bigger homes and risk-averse homebuyers taking advantage of historically low home loan interest rates in the new normal, the report said.

Greater Noida accounts for 39% of the total residential sales followed by Gurugram at 29%.

These two cities continued to account for the maximum absorption of new residential units, much like the trends seen in the pre-Covid period.

In 2020, nearly one-third of total residential launches in NCR were attributed to Noida and Greater Noida. Locations such as Sector 16B, Tech Zone – IV and sectors along the Noida-Greater Noida Expressway and Yamuna Expressway witnessed new supply infusion in the form of apartment projects in affordable and mid-segment categories, the report said.

However, due to the Covid outbreak, there has been a sharp decline of 69% YoY in new launches in other parts of Noida and Greater Noida.

In 2020, Noida and Greater Noida absorbed more than 50% of the total residential units in NCR. While sales velocity remained low, optimism is returning slowly in this market for ready to move in inventory with a price tag of less than Rs 50 lakh.

With projects such as the New Film City, the upcoming Jewar International Airport and a Data Centre Park in the pipeline, employment opportunities will also increase acting as an anchor for the Noida, Greater Noida and Yamuna Expressway belt in the long-term and revive end-user sentiment, the report said.

In terms of residential sales, Gurugram accounted for 29% of total sales in NCR in 2020. However, in comparison to 2019, there was a YoY decline of 18% largely due to an activity standstill in Q2 2020.

With a change in market dynamics due to Covid-19, Gurugram is slowly transforming into a real estate market with offerings for all income segments. In 2021, we expect demand for low-rise housing societies, mid-income housing and plotted developments to intensify once normalcy returns, it said.

Ghaziabad comprised 16% of the residential sales whilst Noida accounted for 14% of the same. The remaining 2% came from Delhi and Faridabad.

In H2 2020, nearly 58% of total sales belonged to the category of ticket sizes greater than Rs 50 lakh. There hasn’t been much divergence in this trend when compared to the H1 2020 or H2 2019 period.

Annual launches decline by 57%

As for launches, in 2020, 9,824 residential units were launched across NCR, the lowest in the past 11 years. Due to the lockdown in H1 2020, developers refrained from introducing new residential supply in the market, which caused the annual launches to decline by 57% YoY.

However, just like the trend witnessed with sales, new launches improved in H2 2020, mainly due to a steady recovery in both Q3 2020 and Q4 2020. In Q3 2020, new residential launches recovered to 72% of 2019’s quarterly average strengthening to 75% of the same in Q4 2020.

In line with past trends, Gurugram continued to account for the lion’s share of new launches in 2020. It comprised 47% of the total, followed by Greater Noida at 20%, Ghaziabad at 19%, Noida at 11% and Faridabad at 3%, the report said.

Grade A developers who focused primarily on the luxury segment earlier have recognised the opportunity in these challenging times to embark on diversifying their portfolio to mid-income housing in Gurgaon. Sector 19, 24, 36 as well as New Gurugram remained favourite locations for new projects such as independent floors and apartment complexes.

Interestingly, the share of Ghaziabad in NCR’s new residential supply has been steadily inching up since 2018. From 16% of the total in 2018, it has inched up to 19% in 2020, despite the Covid crisis. This is largely due to developers trying to capitalize on the latent demand in locations such as Raj Nagar Extension, Siddhartha Vihar and Mohan Nagar where affordable and mid-segment products have been receiving good response from buyers.

Average prices correct by 4%

In 2020, the weighted average residential prices in NCR corrected by 4% over 2019.

Developers continued to sweeten the deal for homebuyers by offering freebies such as gold coins, luxury car, waiver of maintenance for a few months and compensation in case of delay in project delivery to win buyers’ trust and lock in deals in these challenging times, the report said.

After the Covid-19 outbreak, some developers have also started offering innovative schemes such as property swaps or property exchange to allow homebuyers to swap a unit in a stalled project for another piece of property that is finished or nearly finished.

Plots emerge as preferred asset class in Delhi-NCR

The emergence of plots as a favoured type of purchase, even though it requires upfront payment, is evidence of the risk averse mindset of the buyer, the report said.

In NCR, end-users are also inclined towards plotted developments as they offer easy possession compared to under construction projects.

Many established developers are foraying into plotted development schemes with vigour and have recently launched them in locations such Noida, Noida Extension, New Gurugram and Dwarka Expressway. Independent plots as well as plots in established townships are both becoming popular in the new normal, a trend which is here to stay.

Unsold inventory declines by 9% in Delhi-NCR

While both sales and launches remained historically low in the wake of the pandemic, cheaper home loans, lower pricing and pent-up demand led to a faster recovery in sales leading to a decline in unsold inventory by 9% annually over 2019.

In H2 2020, NCR’s unsold inventory stood at 1,10,674 residential units.

Despite a correction in unsold inventory, the quarters-to-sell (QTS) inched up from 11.7 in 2019 to 13.8 in 2020. This was mainly because of a dip in sales velocity during the pandemic. QTS is the number of quarters required to exhaust the existing unsold inventory in the market.

The existing unsold inventory is divided by the average sales velocity of the preceding eight quarters to arrive at the QTS number for the current quarter. A lower QTS indicates a healthier market.