Update: Q1 2021
In Q1 2021, recovery in the residential market continued. On a sequential basis, sales of residential units increased by 17%, while new launches increased by 27% across the seven key markets under consideration.
GDP growth improved to -7.3% in the second quarter and 0.4% in the third quarter of 2020-21, with the measured opening of the Indian economy and the timely support provided by the Government and the Reserve Bank of India (RBI). A sustained resurgence in high-frequency indicators, such as power demand, GST collection, E-way bills, and steel consumption, demonstrates that the economy is in a V-shaped recovery. The rapid progress in the rollout of vaccines will aid in improving consumer sentiments. As optimism returns to households, businesses, investors, and markets, India is expected to become the world’s fastest-growing major economy in 2021.
RBI is likely to support economic growth by holding key policy rates unchanged and maintaining its accommodative stance. Following a series of rate cuts since February 2019, the repo rate currently stands at 4%, lower than the 4.75% observed during the Global Financial Crisis.
In tandem with the GDP growth, the pace of recovery in the residential market intensified, with sales increasing by 51% in Q4 2020 compared to the previous quarter. In Q1 2021, recovery in the residential market continued. On a sequential basis, sales of residential units increased by 17%, while new launches increased by 27% across the seven key markets under consideration.
In Q1 2021, sales of residential units continued an upward trajectory. Sales, at the overall level, increased by 17% on a sequential basis. The sustained growth in sales presents clear signs of demand and buyer confidence coming back to the market. This has been on the back of historically low home loan interest rates, stagnant residential prices, lucrative payment plans and freebies from developers, and government incentives such as reduced stamp duty in states like Maharashtra and Karnataka (for affordable housing). The ease of lockdown restrictions and the commencement of the vaccination drive have further aided in bringing buyers back to the market.
Sales in Q1 2021 recovered to more than 90% of the volumes witnessed in Q1 2020 (pre-COVID) across the top seven cities. Moreover, the markets of Chennai, Hyderabad, Kolkata, and Pune surpassed the sales volumes of Q1 2020.
The COVID-19 pandemic has tilted the scale further in favor of established developers. As the sector shows signs of recovery, prominent developers are expected to be at an advantage and capture a greater market share. Homebuyers have become even more cautious in affecting their home purchase decisions. There is an increased preference for investing in projects by developers with an established track record.
The rationalization in prices across most markets combined with reduced home loan rates has further improved affordability in the residential market. As developers continue to focus on recovering the volumes lost amidst the pandemic and gaining a foothold in their respective markets, prices are expected to be largely range-bound across most of the markets in the short term.