Update: Q4 2020
Amidst the pandemic, GDP in the July-Sep quarter of FY 2020-21 showed higher than expected recovery. Importantly, high frequency economic indicators point towards GDP growth turning positive in the second half of the current financial year. Consequently, GDP growth forecasts for FY 2020-21 and FY 2021-22 were revised upwards. India could well be on its way to be amongst the fastest growing Asian economies in FY 2021-22. Further, the revised growth projections reinforce the government’s view that the economy is in a V shaped recovery.
Further, consumer confidence improved marginally in November 2020 when compared to September 2020 as unlocking spurred economic activity and employment, combined with the progress towards a successful vaccine rollout.
In Q4 2020, uncertainties around the economy and jobs started stabilising, which led to an increase in the pace of recovery in residential real estate. New launches and sales across the seven key markets under review witnessed a significant jump.
The pace of recovery intensified with sales increasing by 51% in Q4 2020 when compared to Q3 2020. Sales picked up on the back of historically low home loan interest rates, stagnant residential prices, lucrative payment plans & freebies from developers coupled with government incentives such as the reduction of stamp duty in some states like Maharashtra & Karnataka (for affordable housing). The easing of lockdown restrictions and the ongoing festive season further aided in bringing buyers back to the market.
On an annual basis, sales in 2020 recovered to more than 50% of the pre-COVID volumes witnessed in 2019. The markets of Hyderabad, Mumbai and Delhi NCR gained maximum foothold in 2020 as compared to 2019.
Few developers in select markets are providing moderate price discounts to kick start sales thereby facilitating cash flows to tide over the crisis in the short term. Moreover, developers are offering attractive incentives including payment schemes such as no EMIs for a year, no stamp duty etc. to attract homebuyers who pressed ‘pause’ in the last few months. This has led to a reduction in effective prices.
As income levels come back to normal, more buyers will come to the market to make the most of this ‘great time to purchase a house’. The translation of this demand into 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.
Thus, improved affordability along with reduced uncertainty around the economy and jobs make 2021 the year to watch out for. The housing market is set to chart a new chapter of growth, fuelled by affordability, reinforced desire to own a house and renewed interest from all buyer categories.