Sales of residnetial units in the over Rs 50 lakh category accounted for 57 per cent of all sales in H2 2020, says a new report.
The affordable category with 43 per cent sales indicates that buyers of this category were far more impacted by the pandemic induced economic uncertainty, said the report by Knight Frank.
“Interestingly, this year saw a rise in the high-end category as buyers in that segment saw this as an opportune time to enter the market. Overall, buyers with strong financial fundamentals and with the capability of servicing long term debt were seen making their house purchases in this period,” it said.
New launches were also on the road to revival as most high-volume markets saw developers announcing new projects on the back of encouraging demand trends, it said. “Both Mumbai and Pune saw identical 121 per cent QoQ rise in new launches. The leader on the board with over 480 per cent rise QoQ was Hyderabad. With total launches at 146,628 units across the country, launches were manageably lower by 34 per cent YoY in 2020,” it said.
During 2020, while unsold inventory levels improved, sluggish sales velocity in the middle of 2020 saw quarters taken to sell rise to an average of 10.1 quarters.
Mumbai and Pune markets led the revival with both sales as well as new launches recovering significantly in the second half of the year. While all India residential sales saw a quarter on quarter (QoQ) rise of 84 per cent, Mumbai (193 per cent) and Pune (143 per cent) recorded higher than average QoQ growth. This was mainly due to Maharashtra’s initiative to reduce stamp duty by over 300 basis point (BPS) for September–December 2020 making home buying very attractive, it said.
The second half of 2020 saw residential revival on account of a few reasons. Firstly, a correction in values made purchase of homes across all major markets highly attractive. Large volume markets like Bengaluru Mumbai and Pune saw year on year (YoY) revisions of 1 per cent, 3 per cent and 5 per cent, respectively. Secondly, home loan rates were at a multidecadal low, which made fence sitters, especially those with sound financials, to make their purchases.
Shishir Baijal, chairman and managing director, Knight Frank India, said, “Despite the on-going pandemic, the H2 2020 sales growth in some cities is fairly encouraging. In Q3 2020, the real estate market started witnessing revival signs, further recording a significant improvement in homes sales during Q4 2020. Out of the total sales in H2 2020, Mumbai and Pune contributed around 50 per cent in home sales. This marvellous performance can be largely attributed to the state government’s decision of reducing stamp duty in Maharashtra. The other state governments would need to jump into the bandwagon or offer something similar to bolster demand across their markets.”
He further said, “The RBI’s decision to maintain low repo rates has narrowed the margin between rent and home loan EMIs paid to banks. Driving house purchase affordability to extremely attractive levels, it has emerged as a major growth driver for the housing sector.”
Rajani Sinha, chief economist and national director, Research, Knight Frank India, said, “The rebound in residential sales in H2 2020, has been much stronger than what was anticipated a few months back. Apart from pent-up demand, there has been a combination of factors like lower housing prices, attractive offers/ discounts by developers, multi-decade low interest rate, high household savings that has given a strong fillip to residential sales. Government policy support like the stamp duty cut in case of Maharashtra has been a very supportive factor for the pick-up in residential sales in this region. Interestingly, the Maharashtra State Government’s revenue collection from registration has also picked up, implying that pick up in housing sales has more than compensated for the lower stamp duty.”