Residential Market Update: Q3 2020

Get a pulse of India's residential market with this quarterly report covering recent movements in the demand and supply dynamics across key Indian cities

October 22, 2020
Residential Market Update: Q3 2020

The pandemic dealt a major shock to the housing market. Sales of residential units plummeted in Q2 2020, with prospective buyers postponing their purchase decisions. However, the situation has improved since May. While there is still a long way to go, the worst is behind for the residential segment. A combination of favourable factors such as low mortgage rates, stable prices and flexible payment plans of developers make this an appropriate time for fence sitters to enter the market and strike a lucrative deal.

The Government and the Central Bank have also played their roles. Central Bank’s move to allow one-time restructuring of personal loans (including home loans) was a long awaited one and aided in improving consumer sentiment. Additionally, the Maharashtra Government reduced stamp duty rates from 5% to 2-3%, effective 1st September 2020. If other state government’s follow suit, this can go a long way in speeding up the revival of residential real estate in India.

Some initial signs of revival were witnessed in the market with sales increasing by 34% in Q3 2020 when compared to Q2 2020. Sales of residential units in Q3 2020 improved in all the residential markets, except for Bengaluru and Kolkata.

In the subsequent quarters, the continuation of the momentum in sales will primarily hinge on enhanced consumer confidence, which in turn depends upon the continued implementation of progressive government policies amidst the gradual revival of the Indian economy at large. The ease of lockdown restrictions and the upcoming festive season might further aid in bringing buyers back to the market.

As sales outpaced new launches, unsold inventory at various stages of construction across the seven markets under consideration decreased marginally from 459,378 units to 457,427 units.

An assessment of years to sell reveals that the expected time to liquidate this stock has increased from 3.6 years in Q2 2020 to 4 years in Q3 2020 because of a slowdown in average sales velocity.

In the backdrop of structural issues like job security and fall in income levels, the uptick in sales is a significant achievement. It directs towards a better than expected recovery in 2021.

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