Even though the sales of residential units have improved in the July – September 2020 quarter (Q2FY21), it will be a long road to recovery for the real estate sector to reach pre-Covid-19 levels, says Knight Frank.
According to the real estate consultant, the sale of residential units across eight major metros in the country – Kolkata, Chennai, Pune, National Capital Region (NCR), Mumbai, Bengaluru, Hyderabad, and Ahmadabad – picked up pace in Q2FY21 to reach 33,403 – up a massive 246 per cent on a sequential basis. Sales of residential units across these metros during the period under review are, however, still 33 per cent lower compared to the 49,905 units sold across these cities in the January – March 2020 period (Q4FY21), and around 46 per cent lower as compared to the quarterly average of 61,467 units sold in 2019.
Among regions, Mumbai, Bengaluru and NCR accounted for 56 per cent of the quarterly sales volume during Q3-2020 compared to 62 per cent in 2019, primarily due to a fall in Bengaluru’s share in total sales for the period.
“It is too soon to say that the real estate sector is out of the woods. A number of stuck real estate deals would have been completed during the quarter,” said Gulam Zia, executive director for valuation & advisory retail & hospitality at Knight Frank.
Prices dip
Weighted average prices have dipped 3 – 7 per cent in six of the eight markets during the July – September 2020 quarter as compared to a year ago. “Among cities, Bengaluru (up 3 per cent) and Hyderabad (up 4 per cent) were the only markets that saw prices grow YoY, as developers in these predominantly end-user markets sustained pricing power in a favourable demand-supply scenario,” the report said.
| PRICES SOFTEN | |
| MARKET | PRICE CHANGE YOY |
| Chennai | -7% |
| Pune | -5% |
| NCR | -5% |
| Kolkata | -3% |
| Ahmedabad | -3% |
| Mumbai | -2% |
| Bengaluru | 3% |
| Hyderabad | 4% |
| Source: Knight Frank Research | |
Attractive home loan rates, fall in prices of residential units, aggressive marketing of ready inventory and indirect discounts / freebies to the buyers are some of the factors Knight Frank believes have helped move the demand needle in Q3 2020.
“Homebuyers seemed inclined to acquire ready or near ready inventory to minimize completion risk. This was reflected in the average age of inventory staying at 16.9 quarters in Q2FY21 compared to 16.2 quarters in the year-ago period. This is also in line with developers focusing on liquidating older inventory before launching new products, which has helped marginally reduce unsold inventory levels to 0.44 million units in Q3CY20, 1 per cent less than a year ago,” Knight Frank said.
A similar report by Emkay Global suggests residential unit sales have already recovered to 50 per cent of the pre-Covid-19 levels in Q3CY20 – driven by historically low financing rates, upfront discounts, and regulatory reliefs on stamp duty charges. “Investment demand is yet to recover and city-centric sales are being driven by younger customers in the 32-38 age bracket,” wrote Amar Kedia, an analyst tracking the sector at Emkay Global in an October 7 note.
| RESIDENTIAL SALES SNAPSHOT | ||||
| MARKET | 2019 QUARTERLY AVERAGE | Q1 2020 | Q2 2020 | Q3 2020 |
| Kolkata | 2,817 | 2,937 | - | 3,921 |
| Chennai | 4,240 | 2,981 | - | 3,085 |
| Pune | 8,202 | 7,813 | 2,235 | 4,918 |
| NCR | 10,707 | 5,446 | - | 6,147 |
| Mumbai | 15,236 | 15,959 | 2,687 | 7,635 |
| Bengaluru | 12,019 | 8,693 | 3,484 | 4,912 |
| Hyderabad | 4,067 | 3,808 | 974 | 1,609 |
| Ahmedabad | 4,181 | 2,268 | 252 | 1,176 |
| Total | 61,467 | 49,905 | 9,632 | 33,403 |
| Source: Knight Frank Research | ||||
Going ahead, Knight Frank expects the road ahead for the residential property segment to remain challenging. Developers’ cash flows remain under pressure despite the extension on loan moratoriums and RERA completion deadlines are some of the factors that will impact sales.
“If the economy picks up over the next few months, the demand for residential units will come back to pre-Covid-19 levels sooner than later. As seen in Maharashtra (cut in stamp duty rates), we need a demand-side stimulus from the government,” said Shishir Baijal, chairman and managing director at Knight Frank India.
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