Despite the COVID-19 pandemic, home sales volume jumped by 2.5 times to 33,403 units in the third quarter of 2020 compared to 9,632 in the second quarter of 2020. New residential unit launches increased by 4.5 times to 31,106 units in third quarter, compared to 5,584 units in the previous quarter, a Knight Frank India report has said.
Sales saw an uptick in the third quarter of 2020 over the preceding quarter on account of innovative schemes offered by real estate developers. These included financial benefits, discounts and easy payment options to attract buyers during the period of lockdown. Developers were also able to garner buyer interest through active usage of digital platforms during this period to engage with customers.
Lower home loan interest rate also supported pick-up in residential sales. The acute labour crunch experienced in the earlier part of the lockdown also started to ease out, as workers began to return to main cities seeking employment.
Even while there is a considerable distance from normality, the residential sector has started to show signs of improvement in the third quarter of 2020, the report titled India Real Estate Update (July – September 2020) that analysed the residential and office market performances across eight major cities for the Q3 2020 period, said.
The total residential sales of the top eight markets under review during Q3 2020, reached 54 percent of 2019 quarterly average. Similarly, residential launches in Q3 2020, improved to 56 percent of the 2019 quarterly average. Mumbai, Bengaluru and NCR accounted for 56 percent of the quarterly sales volume during Q3 2020 compared to 62 percent in 2019, primarily due to a fall in Bengaluru’s share in total sales for the same period.
Kolkata was the only market that exceeded the quarterly average of 2019 in both parameters with sales and new launches increasing to 137 percent and 139 percent respectively compared to pre-Covid levels, albeit on a low base.
Weighted average prices in the third quarter of 2020 registered a year-on-year decline in the range of 3 to 7 percent in six of the eight markets. Hyderabad and Bengaluru were the only markets that witnessed a price increment of 4 percent and 3 percent year-on-year respectively, as developers in these predominantly end-user markets sustained pricing power in a favourable demand-supply scenario, the report noted.
The report also noted that homebuyers are more inclined to acquire ready or near ready inventory to minimise completion risk. This is reflected in the
average age of inventory staying at 16.9 quarters in Q3 2020 compared
to 16.2 quarters in the year ago period.
This is also in line with developers focusing on liquidating older inventory before launching new products which has helped marginally reduce unsold inventory levels to 0.44 mn units in Q3 2020, 1 percent less than a year ago.
“There has been a meaningful improvement in sales and launches in Q3 2020. Developers have been focusing on liquidating inventory and homebuyers inclined to purchase ready assets has translated into reduced unsold inventory levels in this quarter. For markets such as Mumbai and Pune, additional push by the state government in the form of reduced stamp duty has helped in demand generation and revenue creation for the state government,” said Shishir Baijal, chairman and managing director, Knight Frank India.
Going forward, the festival season will be crucial for developers. This may prove to be an opportune time for end-users with adequate financial stability to make their investments. The near-term outlook on sales continues to depend on the speed and trajectory of recovery in the economy in the months ahead, he said.
“Strong demand stimulus like the one by the Maharashtra government and historic low home loan interest rates have been the key reason for the current uptick residential sales. These measures have compelled end users, those looking for good deals for their property, to take their purchase decision. Developers also took the opportunity to make strategic offers, especially on their unsold inventory, to support the sales velocity,” said Rajani Sinha, chief economist and national director – Research, Knight Frank India.