The month of June witnessed a pick-up in demand in real estate, with most states announcing relaxations in travel movements amid a dip in the number of daily new infections, a recent report by online property brokerage firm PropTiger.com revealed.

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Half of the sales in the April-June quarter of 2021 took place in June itself as states started to open up and remove restrictions, showed the report titled Real Insight (Residential) – April-June (Q2) 2021.  

“Due to the challenging situation during the April-June quarter in 2021, when infections and casualties caused by the coronavirus hit a peak before subsiding towards the end of May, both demand and supply were hit during the first two months when most states put in place various restrictions and lockdowns to curb the spread of the virus. However, some ground on both the numbers were covered during the month of June, when states started to open up. The same is reflected in the second quarter demand and supply numbers,” Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and PropTiger.com.

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“We expect improvement on both these indicators of residential real estate health in the upcoming quarters since India’s vaccination programme is likely to gather pace. It’s also important to mention that despite the lockdowns and subdued sentiment, the government gave the sector a much-needed boost with the passing of the Model Tenancy Act, which is expected to give a fillip to the much-needed rental housing supply in the country. The RBI is also doing its bit by continuing to maintain its accommodative stance, keeping the repo rate and reverse repo rate at a status quo of 4 per cent and 3.35 per cent, respectively, which in turn would allow the low mortgage interest rate regime for homebuyers to continue. All these measures, combined with latent demand, will certainly help our sector to bounce back faster than what was anticipated earlier,” he further added.   

New supply remains resilient; shows 74% surge YoY in Q2 2021 

The economic uncertainty caused by the second wave of the coronavirus pandemic has forced real estate developers in India to adopt a more cautious approach towards spending, which is reflected in new supply numbers for the April-June period (Q2) of the calendar year (CY) 2021. 

In the three-month period that saw dramatically high numbers of infections and fatalities caused by the virus spread, supply of new apartments in India’s eight prime residential markets witnessed a decline of 59 per cent when compared to the January-March period of this year, the report shows.  A total of 21,839 new units were launched in these markets during the second quarter of CY21. However, when compared to the same period last year, new launches show an increase of 74 per cent. 

This remarkable increase in launches in the second quarter over the same period the previous year could be explained by the fact that during a large period of the second quarter of CY2020, India continued to remain under a national lockdown that adversely hit the economy, forcing Asia’s third-largest economy to slip into recession in 2020. This forced liquidity-starved real estate builders in the country to tread highly cautiously during April-June 2020. 

Affordably priced housing continues to be the key focus area for India’s real estate developers, and this is evident from the fact that majority of the new supply was concentrated in the mid-segment. In fact, 35 per cent of the projects launched in the second quarter were in the Rs 45-75 lakh price bracket shows the report. 

“While the impact of the second wave of the virus was universal, some markets were impacted more as they were the hardest hit by the second wave of the pandemic. This has been reflected in the high levels of unsold inventory and higher inventory overhang in markets like the NCR and MMR. This is especially true of the NCR market, where the inventory overhang is as high as the MMR even though the unsold stock in that market is less than half of what is there in the MMR,” said Mani Rangarajan, Group Chief Operating Officer, Housing.com, Makaan.com and PropTiger.com.   

Home sales decline 16% YoY 

Even though real estate has emerged as a popular asset class among consumer in the aftermath of the pandemic, housing sales in the second quarter showed a decline on a sequential as well as year-on-year basis. With 15,968 transactions being recorded across these eight markets during the second quarter, home sales during the three-month period ending June 30 declined 16 per cent YoY while registering a 76 per cent QoQ fall. All cities saw sales declining quarter on quarter while annual comparisons show some improvement for few cities. 

With the second wave of the pandemic posing questions about the certainty of incomes, home buyers put on hold their plans to invest in property despite the fact that a 15-year-low home loan interest rate currently makes property purchase a sound financial proposition.  According to the report, 45per cent of homes sold during the three-month period were priced up to Rs 45 lakh. 

Inventory overhang increases on the back of slow sales velocity 

With a slight increase of 1 per cent QoQ, housing stock in these residential markets reached 711,215. Inventory overhang — the average estimated time builders would take to sell off the unsold stock, keeping in view the current sales velocity —has also increased by one month when compared to the previous quarter.  The report pegs the inventory overhang at 48 months now as against 47 months in the first quarter. 

While the MMR and the NCR markets have the highest inventory overhang of 64 months each, Hyderabad had the lowest inventory overhang of 27 months. Even though Kolkata is now the city with the lowest number of unsold units, the demand slowdown has kept its overhang higher than Hyderabad. 

On the other hand, the western markets of Mumbai and Pune hold the highest share of unsold stock, claiming a 54 per cent share in the overall stock.