A combination of favourable factors such as low mortgage rates, attractive prices combined with developers’ lucrative payment plans together reinforce the longer-term potential of the sector. For end users, the next 12 months are ideal to buy a house, says JLL
Driven by low interest rates and lucrative payment plans, residential sales across the country increased by 34 percent in the September quarter, compared to the June quarter amid the COVID-19 pandemic.
Mumbai accounted for 29 percent of the total sales in the quarter and Delhi-NCR contributed 22 percent, a report by JLL Research has said.
The pickup in sales activity was also driven by stronger demand in Chennai, Hyderabad, and Pune.
Residential market activity was also supported by renewed interest from NRIs in the third quarter of 2020, resulting in more pent-up demand in the market and increased enquiries received by developers.
“We are feeling cautiously optimistic about the residential market, driven by sales volumes in Mumbai and Delhi. A combination of favourable factors such as low mortgage rates, attractive prices combined with developers’ lucrative payment plans together reinforce the longer-term potential of the sector. For end users, the next 12 months are ideal to buy a house,” said Ramesh Nair, Chief Executive Officer and Country Head, India, JLL.
“In the subsequent quarters, the translation of demand into sales will primarily hinge on enhanced consumer confidence, which in turn depends upon the continued implementation of progressive government policies amidst the gradual revival of the Indian economy at large,” he added.
“The further easing of lockdown restrictions and the upcoming festive season might help in bringing buyers back to the market. An assessment of years to sell reveals that the expected time to liquidate stock has increased from 3.6 years in Q2 2020 to 4 years in Q3 2020. While the residential space remains unpredictable, favourable supply dynamics could deliver potential upside for both homebuyers and developers in the medium term,” said Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.
Delhi-NCR in particular saw residential sales move up 38 percent in Q3 2020, with ready-to-move-in homes seeing a higher demand. Major traction was from Noida, contributing nearly 48 percent to the overall sales in the region as it caters to all price segments.
This was followed by Ghaziabad constituting 31 percent of the sales, and it mainly caters to mid and affordable segments. Gurugram accounted for nearly one-fifth of the overall sales during this quarter.
As far as new launches are concerned, the focus is on mid and affordable segment. New launches were restricted with 12,654 units launched in the third quarter, a decline of 14 percent quarter-on-quarter (QoQ). Developers focused on completion of under-construction projects and clearing their existing inventory, the report said.
Hyderabad and Mumbai accounted for over 60 percent of the total new launches in the quarter. The drop in new launches was driven by Bengaluru, which witnessed a substantial decline of over 80 percent as compared to the second quarter 2020.
With nearly 75 percent of the new launches in the sub Rs 1 crore category, focus on mid and affordable segments continued in Q3 2020.
Moving ahead, the focus on these price segments is expected to continue with developers focussing to reap the benefits of strong pent-up demand, the JLL report said.
Unsold inventory dipped in the third quarter and sales outpaced new launches as unsold inventory across the seven markets (Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Pune and Kolkata) decreased marginally from 459,378 to 457,427 units.
Mumbai and Delhi-NCR together account for more than half of the unsold stock which are at various stages of construction.
Over the last few years, residential prices in most markets have remained stagnant. Developers have been operating with low margins and the chances of a significant reduction in prices is unlikely, the report said.As far as prices are concerned, they remained largely stable across all the seven markets in Q3 when compared to the previous quarter. However, it is important to note that developers in certain markets are providing moderate price discounts to kick-start sales, thereby facilitating cash flows to tide over the crisis in the short term.