Despite the continuing COVID-19 pandemic, residential home sales aggregated to 35,132 units during the third quarter of 2020, an increase of 85 percent over the previous quarter. The growth can potentially be attributed to pent-up demand due to the prolonged lockdown across the country, a report by real estate brokerage firm PropTiger.com said.
Compared to the third quarter of 2019, there was a significant decline of 57 percent year-on-year across eight major cities, the report said. During July-September 2019, sales of residential properties across eight cities stood at 81,886 units.
New supply grew almost 60 percent on a quarter-over-quarter basis, with 43 percent of the 19,865 units launched coming in through the affordable housing segment. However, on a year-over-year basis, launches showed a significant downward trend declining by 66 percent, the report, titled Real Insight Q3 2020, found.
Recovery in the fourth quarter is likely to continue and new launches will continue to take place in early part of next year, the report said.
“Even in October to December, real estate developers are expected to have a decent launch pipeline. The upcoming festival season will also be crucial and will determine the demand outlook for the next 12 months. Discounts and freebies offered by developers during the festive season will help drive demand,” said Dhruv Agarwala, Group chief executive officer, Housing.com, which includes Makaan.com and PropTiger.com
Housing units in the sub-Rs 45 lakh price bracket, categorized as the affordable housing segment under income tax laws in India, made the biggest contribution to sales during the quarter, contributing 45 percent to the overall sales numbers.
“Green shoots are visible pointing to the start of a recovery in residential real-estate, evidenced by improvement in new launches and sales on a quarter-over-quarter basis. These are unprecedented times, which have made buyers aware of the important role that homes play in ensuring their well-being as well as their physical and emotional security. This, together with the fact that real-estate is a hard asset, and the fact that home loan rates are near a 15-year low have encouraged buyers to return to the market,” Agarwala continued.
“With several macro-economic indicators showing a positive trend in September, we may well be on the road to a more sustained recovery and the upcoming festival season will be critical in determining the growth trajectory in the sector over the next twelve months,” he said.
He also pointed out that reduction of stamp duty in Maharashtra had acted as a catalyst and revived housing sales in the Mumbai Metropolitan Region (MMR) and Pune. “Other states should also lead by example and cut stamp duty on property registration,” he added.
Overall, two localities each from the MMR and the National Capital Region (NCR) and one locality from Bengaluru made it to the top-10 list in terms of sales.
“Consumers continue to perceive real-estate as the most stable asset and a number of them are looking to upgrade their homes as working from home is likely to continue. The government has also been supportive by taking steps to make buying more attractive. While states such as Maharashtra have reduced stamp duty rates on property transactions, financial institutions have also brought home loan interest rates to sub-7 percent level since the RBI brought the repo rate to 4 percent,” said Mani Rangarajan, Group chief operating officer, Housing.com.
According to the PropTiger data, Bengaluru sales declined by half and were at 4,825 units from 9,613 units, while the NCR witnessed 39 percent dip to 4,427 units from 7,293 units. Housing sales in Ahmedabad fell 48 percent in July-September period to 3,339 units, from 6,472 units in the year-ago period.
Housing sales in Chennai fell 40 percent to 2,317 units from 3,831 units. The demand in Hyderabad decreased 57 percent to 3,260 units from 7,663 units.
Housing sales in the MMR declined 72 percent to 7,378 units during July-September period from 26,466 units in the corresponding period of the previous year, the report said.
Meanwhile, for the nine-month period of January to September 2020, the MMR witnessed a 57 percent decline in housing sales to 35,906 units from 84,087 units. Pune saw 49 percent demand contraction during the same period, to 27,538 units from 54,020 units in the corresponding period of the previous year.
Inventory declines while overhang increases
After seeing a reduction of 12 percent year-on-year, unsold stock in the top eight residential markets was at 7,23,060 units as on September 30. Developers continued to show restraint in launching new supply because of the ongoing market conditions. Unsold stock contracted by 2 percent in the September quarter when compared to the preceding quarter.
The housing markets in the West region, however, continue to have the highest share in the overall unsold inventory. Put together, Mumbai and Pune contribute 56 percent to the national unsold stock, followed by NCR and Bengaluru, with 15 percent and 10 percent, respectively.
Due to the strain on consumer demand, as a result of the coronavirus-induced economic uncertainty, inventory overhang has increased significantly from the level seen in the same quarter last year. National inventory overhang increased to 43 months as of September 2020, as compared to 28 months in Q3 2019. Inventory overhang is the estimated time period within which developers will be able to sell off the current unsold stock.
Price growth muted
While end-user demand and controlled supply in the markets of Ahmedabad and Hyderabad have helped firm prices in these cities, other cities have seen almost negligible -- upwards or downwards -- movement annually in terms of average pricing during the three-month period ended September 30.
In Ahmedabad and Hyderabad, there has been an annual increase of 6 percent in prices.
With regard to the weightage average property prices in top eight cities, Hyderabad and Ahmedabad witnessed a change of 6 percent and Bengaluru and Pune saw a change of 2 percent. Mumbai and Kolkata saw a price change of 1 percent and NCR -1 percent.