As many as 15,968 transactions were recorded across the key eight real estate markets in the April to June quarter, leading to home sales declining by 16 percent year-on-year during the three-month period while registering a 76 percent quarter-to-quarter fall, a report by online property brokerage firm PropTiger has said.
The second wave of the pandemic posed questions about the certainty of incomes, forcing homebuyers to put on hold their plans to invest in property despite the fact that a 15-year-low home loan interest rate currently made property purchase a sound financial proposition.
The economic uncertainty caused by the second wave of the coronavirus pandemic has forced real estate developers in India to adopt a more cautious approach towards spending, which is reflected in new supply numbers for the April-June period (Q2) of CY 2021.
According to the report titled Real Insight (Residential) – April-June (Q2) 2021, 45 percent of homes sold during the three-month period were priced up to Rs 45 lakh.
New supply, however, remained resilient amid the second wave, indicating a 74 percent surge year-on-year in the second quarter of 2021. Most of this supply came up in the month of April before the lockdowns were announced.
But with most states announcing relaxations in travel movements amid a dip in the number of daily new infections, the month of June has seen a pick-up in demand in real estate, the report said. Half of the sales in the April-June quarter of 2021 took place in June itself as states started to open up and remove restrictions.
Hyderabad, Bengaluru and Mumbai contributed to the new supply, it said, adding close to 5 lakh units are expected to hit the market by the end of 2021 of which 45 percent have already been completed by the end of the first half of 2021.
“Number of sales in June far exceeded those in April. Almost 55 percent sales took place in the month of June after lockdowns were relaxed. As many as 35 percent to 40 percent people who bought homes were those upgrading to bigger units,” explained Mani Rangarajan, Group Chief Operating Officer, Housing.com, Makaan.com and PropTiger.com
Another new trend that has emerged is that demand for under-construction units is picking up compared to ready to move in units that are priced slightly higher. There are as many as 5 lakh RTM units in the market, he said, adding almost 85 percent demand for homes is from end users.
The key movers of demand were the cities of Hyderabad, Mumbai and Pune, the report said.
In the three-month period that saw dramatically high numbers of infections and fatalities caused by the virus spread, supply of new apartments in India’s eight prime residential markets witnessed a decline of 59 percent when compared to the January-March period of this year, the report shows.
A total of 21,839 new units were launched in these markets during Q2CY21. However, when compared to the same period last year, new launches show an increase of 74 percent.
“We expect improvement on both these indicators of residential real estate health in the upcoming quarters since India’s vaccination programme is likely to gather pace. It’s also important to mention that despite the lockdowns and subdued sentiment, the government gave the sector a much-needed boost with the passing of the Model Tenancy Act which is expected to give a fillip to the much-needed rental housing supply in the country,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and PropTiger.com.
Inventory overhang increases on the back of slow sales velocity
With a slight increase of 1 percent QoQ, housing stock in these residential markets reached 711,215. Inventory overhang —the average estimated time builders would take to sell off the unsold stock, keeping in view the current sales velocity —has also increased by one month when compared to the previous quarter. The report pegs the inventory overhang at 48 months now as against 47 months in Q1.
While the MMR and the NCR markets have the highest inventory overhang of 64 months each, Hyderabad had the lowest inventory overhang of 27 months. In NCR, a large part of the inventory overhang consists of stuck projects.
On the other hand, the western markets of Mumbai and Pune hold the highest share of unsold stock, claiming a 54 percent share in the overall stock.
Prices may increase going forward
No market covered in the analysis showed any value depreciation during the quarter while growth remained flat for the Mumbai Metropolitan Market, the report said.
Recoding an annual appreciation of 5 percent each in average rates of new supply, the Ahmedabad and Hyderabad property markets, stood out in the list. Values of property in India’s Silicon Valley, Bengaluru, also appreciated 4 percent year-on-year in Q2, it said.
The slow sales velocity pushed inventory overhang from 35 months to 48 months which is about four years, the report said.
“There is never a bad time to buy property. It may be the right time for younger people to buy, especially if they intend to live there. Prices have not appreciated for some years now and cost of construction has gone up by 4-5 percent. While prices have already inched up in cities such as Kolkata, Chennai and Bengaluru, discounts may also start reducing soon,” said Rangarajan.
One may see prices inch up in the next two quarters if demand holds up and that would be healthy for both buyers as well as developers, he added.