Pent-up demand for residential real estate manifesting itself

During the quarter, Chennai and Delhi NCR registered maximum residential sales in the RTMI segment, whereas Hyderabad accounted for a 6 percent share in the demand from this segment.

The pent-up demand for residential real estate is manifesting itself with the sector showing signs of gradual improvement and supplies slowly gathering steam to fulfill the aspirations of home buyers. The numbers for the month of June are encouraging in terms of enquiries generated and inching up of the property prices at several locations across the country.

Having suffered immensely, especially during the past one-and-a-half years on account of the outbreak of the COVID-19 pandemic and subsequent nation-wide lockdown to check the spread of the coronavirus, the property market has started picking up, thanks to the calibrated as well as practical approach adopted by the Centre and the state governments in dealing with the second wave of the pandemic during April-May.

Much of the pain of the second wave of the pandemic was avoided as unlike the first wave, the government refrained from total lockdown to deal with sudden surge in coronavirus cases. Partial lockdowns and speed of vaccination to a great extent prevented mass exodus of labour and also the complete stoppage of construction work.

With the second wave of pandemic abating, the home buyers have come out and started looking for properties that suit their budgets and preferences. One need not look into statistics to know what is happening in the market, but a casual look at the property advertisements in newspapers indicates that something positive is going on in the real estate sector.

According to PropTiger’s quarterly report ‘Real Insight (Residential) Q2 2021’, 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 on movement. This is mainly because the second wave of the pandemic was at its peak during the month of April and May, resulting in dramatically high numbers of infections and fatalities. The situation improved significantly in the month of June and so the market for residential property. The momentum, if not halted by the third wave, is likely to continue at an accelerated pace in the months to come.

Although the improvement is all over, the affordable housing segment continues to be the key focus area for India’s real estate developers. This is evident from the fact that the majority of the new supply was concentrated in the mid-segment. In fact, 35% of the projects launched in Q2 were in the Rs 45-75 lakh price bracket, shows the report.

Contrary to the previous trends where Mumbai and Pune dominated the new launches, Hyderabad turned out to be the frontrunner in the new supply category in Q2 2021, with a 40 percent contribution to the total pie, the report adds.

Hyderabad recorded over 8,800 new units launched during the quarter, followed by Bengaluru with 3,400 units. The southern cities (Hyderabad, Bengaluru and Chennai) together contributed 58 percent to the overall launches in Q2 2021. Mumbai and Pune together contributed nearly 26 percent to the overall supply.

As regards sales, there is an increased preference towards completed or nearing completion projects, as buyers are cautious about the risk associated with the over-delayed projects. However, on the positive side, during the second quarter, there has been a slight reduction in the share of the ready-to-move-in (RTMI) homes in the total sales volume. This augurs well for the builders who are working overtime to complete the ongoing projects.

Sales in the RTMI segment contributed 16 percent to the overall demand as against 21 percent in the preceding quarter. During the quarter, Chennai and Delhi NCR registered maximum residential sales in the RTMI segment, whereas Hyderabad accounted for a 6 percent share in the demand from this segment.

Conclusion

With the rapid vaccination drives and favourable monetary measures, and the latest recovery cues in June 2021, the buyers’ sentiment is expected to remain positive and induce the much anticipated recovery in the real sector. However, a complete turnaround is still distant, and the market will be in a wait and watch mode with only serious end users positively culminating their home buying decisions.

(By Rajan Sood, Business Head, PropTiger.com)