Home sales in the top 8 cities of the country have witnessed an 84% QoQ growth in the Q4 of 2020, reveals a Knight Frank India report.
Fuelled by latent demand during the festive season as well as lower home loan interest rates, home sales in the top 8 cities of the country have witnessed an 84% QoQ growth in the Q4 of 2020, reveals a Knight Frank India report.
As per the report, a significant amount of latent demand came to the market during the festive season in Q4 2020 and as a result, with 84% QoQ jump, housing sales reached an exact 100% of the pre-COVID-19 level. In case of the residential market, latent demand was rekindled by a multi-decade low home loan interest rate and flexible price and payment terms offered by developers.
“These two catalysts ensured that the consumers enjoyed the best house purchase affordability in a decade. A greater need for home ownership was seen as people spent more time indoors on account of restricted mobility during the pandemic. This translated into strong demand for bigger and better houses. The strongest movement in demand was seen in Mumbai and Pune markets, due to a limited-period 300 basis point cut in stamp duty rate by the Maharashtra state government. We believe more stimulus measures like this are the need of the hour for other markets too to reinvigorate the country’s housing market to its true potential,” says Shishir Baijal, Chairman and Managing Director, Knight Frank India.
Mumbai and Pune markets, in fact, led the revival with both sales as well as new launches recovering significantly in the second half of the year. While all India residential sales saw a quarter-on-quarter (QoQ) rise of 84%, Mumbai (193%) and Pune (143%) recorded higher than average QoQ growth. This was mainly due to the Maharashtra state government’s initiative to reduce stamp duty by 300 basis points (BPS) for a limited period between September and December 2020, making home buying very attractive.
The second half of 2020 saw a residential sale revival due to certain specific reasons. Firstly, a correction in values made purchase of homes across all major markets highly attractive. Large volume markets like Bengaluru, Mumbai and Pune saw year-on-year (YoY) revisions of 1%, 3% and 5%, respectively. Secondly, home loan rates reduced to a multidecadal low which made fence sitters, especially those with sound financials, take advantage and make their purchase. Thirdly, as a direct result of the pandemic, the need and desire to own houses that took care of buyers’ requirements influenced purchase decisions.
The report reveals that sales in the Rs 50 lakh + category constituted 57% of all sales in H2 2020, showing a growth trend and leaving behind the affordable category at 43%, as buyers of the affordable category were far more impacted by the pandemic induced economic uncertainties. Interestingly, the year saw a rise in transactions in the high-end category as buyers in that segment saw this as an opportune time to enter the market. Overall, buyers with strong financial fundamentals, with the capability of servicing long-term debt, were seen making their house purchases during this period.
New launches were also on the road to revival as most high-volume markets saw developers announcing new projects, since demand trends were seen to be highly encouraging. Both Mumbai and Pune saw an identical 121% QoQ rise in new launches. The leader on the board with over 480% QoQ rise was Hyderabad. With total launches across the country at 146,628 units, launches were lower by 34% YoY in 2020; and while unsold inventory levels improved, sluggish sales velocity in mid-2020 led Quarters to Sell (QTS) to rise to an average of 10.1 quarters.
Baijal says, “Despite the on-going pandemic, the H2 2020 sales growth in some cities is fairly encouraging. In Q3 2020, the real estate market started witnessing revival signs, further recording a significant improvement in home sales during Q4 2020. Of the total sales number in H2 2020, Mumbai and Pune contributed around 50% in home sales. This marvellous performance can be largely attributed to the Maharashtra state government’s decision of reducing the stamp duty. Other state governments need to follow suit and offer something similar to bolster demand across their markets.”