Housing market rebounds in September quarter; sales, new launches up 90% in top 8 cities: Report

Housing market rebounds in September quarter; sales, new launches up 90% in top 8 cities: Report

Even as the second wave of the Covid-19 pandemic slowed the momentum of the residential market during the June quarter, top 8 property markets witnessed a smart rebound in September quarter as mobility restrictions were relaxed and business started to return to normal.

Housing sales rose 92% from a year ago to 64,010 units across these markets during the quarter, exceeding the pre-pandemic 2019 average quarterly sales by 4%, signifying a return to normalcy, showed a Knight Frank India report.

New residential unit launches also increased 90% from a year ago to 58,967 units during the quarter. Both sales and launches have recorded a significant recovery compared to 27,232 residential unit launches and 27,453 residential unit sales in the previous quarter.

The total residential sales of the top eight markets during the quarter, reached 104% of 2019 quarterly average. Similarly, residential launches also improved to 106% of the 2019 quarterly average.

“The market seems to have factored in the very low likelihood of a complete lockdown as was seen last year due to the ample availability of the COVID vaccine. Comparatively lower residential prices, attractive interest rates and higher household savings rate over the past year should support housing demand going forward. With the upcoming festive season, the market is gearing up for new project launches and consumers are likely to reciprocate,” said Shishir Baijal, CMD, Knight Frank India.

According to him, while financial stress remains a significant factor for developers across markets, homebuyers’ preference for grade A developers and their access to cheaper credit has positioned them well in this recovering market.

Demand momentum was strong across markets with all cities reporting on-year growth in sales. Mumbai and Bengaluru, which account for over half the inventory in the market, saw sales grow by 109% and 131% on-year, respectively during this quarter.

The share of sales in the ticket size Rs 50 lakh to Rs 1 crore grew to 35% in September quarter compared to 32% a year ago. This can be attributed to the homebuyers’ need to upgrade to larger living spaces with better amenities.

The share of home sales in the less than Rs 50 lakh category declined to 43% during the quarter from 45% a year ago as the income disruptions caused by the pandemic were more keenly felt by the lower income demographic.

Stamp duty cuts were a significant intervention applied by the state governments of Maharashtra, Karnataka and West Bengal to boost residential sales. The stamp duty cut in Maharashtra was effective till March 2021 and sparked a sharp recovery in sales volumes in Mumbai and Pune in the given period.

“These measures (stamp duty cuts) have convinced the fence sitters to make the home buying decision. Going forward with the economy improving, interest rate remaining low and overall affordability improving, the sweet spot for home buying will be sustained given the strong positive impact of real estate sector recovery on overall economy, the central and state governments should look at policy measures to further stimulate housing demand,” said Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India.

Weighted average prices across markets remained stable during the quarter and did not decline compared to the preceding quarter. The Chennai, Hyderabad and Kolkata markets saw prices increase marginally on a year-on-year basis during the quarter.

Stamp duty cuts have proved to be an effective demand stimulant in the case of Mumbai, Pune and Kolkata where the state governments have applied a broad-based cut across ticket sizes in the primary market.

Interestingly, despite the withdrawal of the stamp duty cut window, key markets of Mumbai and Pune have continued their sales momentum after a brief dip in the second wave impacted June quarter.

Hyderabad and Kolkata have seen the strongest recovery to pre-pandemic levels in terms of sales as well as launches, while the stamp duty cut in West Bengal helped sales in Kolkata spike 75% on-year to 6,861 units during the September quarter.

Bengaluru, India’s information technology-hub, has also seen a strong bounce back in line with healthy growth in the IT sector.

On the supply side, developers are responding well to the shift in homebuyer sentiment and pursued an aggressive pricing strategy over the year with spot discounts, financing deals, stamp duty waivers and other freebies to entice buyers.

Homebuyers are more inclined to acquire ready or near-ready inventory to minimize completion risk. This is reflected in the average age of inventory reducing to 16.1 quarters in the September quarter from 17.1 quarters in the year ago period. This is also in line with developers focusing on liquidating older inventory before launching new products that has helped reduce unsold inventory levels by 2% from a year ago to 0.44 million units.

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