Hit hard by the demand slump in the residential segment as well as dampening consumer confidence, housing sales and new launches declined significantly in the country’s eight prime residential markets during the April-June quarter.
Hit hard by the demand slump in the residential segment as well as dampening consumer confidence, housing sales and new launches declined significantly in the country’s eight prime residential markets during the April-June quarter, as per a quarterly analysis by PropTiger.com.
The current quarter, in fact, saw a steep decline in new launches of residential units compared to the same period last year. Q2 2020 recorded new launches to the tune of 12,564 units, a decrease of 81% when compared to Q2 2019. However, on a half-yearly comparison, new launches declined by 65% in the first half of 2020 as compared to the same period in 2019.
Similarly, in Q2 2020, sales of residential units decreased by a whopping 79% over the same period last year with only 19,038 units sold during the quarter as against 92,764 units in the Q2 2019. On a half-yearly comparison, demand registered a 52% contraction in H1 2020 compared to the same period in 2019. That is because demand slump in the residential segment has been further aggravated by the current COVID-19 crisis, and overall economic uncertainty coupled by job security have resulted in further dampening of consumer confidence.
The report states that divergent to the previous trends where Mumbai and Pune dominated the new launches, Bengaluru contributed nearly 26% of the overall launches in Q2 2020, followed by Hyderabad and Delhi NCR, each with 16% share of the overall launches. In absolute terms, these three cities recorded new launches of over 7,300 homes. However, all the cities witnessed a substantial decline in new launches, as compared to the same period last year.
New launches increased its share in more than Rs 1 crore price bracket with 24% of the projects launched in this quarter falling in the price bracket. Interestingly, less than Rs 45 lakh category is no longer the largest contributor to the overall launches. Its share has declined from 53% in Q2 2019 to 28% in Q2 2020.
With the on-going phased opening of the economy and the manpower crunch induced by the reverse migration, construction activity is yet to pick up pace across cities. However, branded developers are expected to launch new projects in cities such as Bengaluru, Mumbai and Pune, amongst other cities, in the coming quarters.
Despite being the most affected cities with the maximum number of Covid-19 cases, Mumbai and Pune dominate sales with a share of 50% in the overall pie. The second quarter also saw a resurgence of interest in the mid to high price bracket with nearly 56% of the sales in the more than Rs 45 lakh price bracket.
Various measures announced by the government in the past to boost sales of affordable properties has nudged buyers to look for homes in this segment. 44% of the sales in Q2 2020 have been in the less than Rs 45 lakh price bracket.
Developers are using innovative ways to liquidate the current inventory levels and invigorate demand. Refundable booking amount, cashback schemes, flexible payment plans, and the use of technology for site visits through drones and virtual property tours are extensively being used to attract the fence-sitting buyer. Developers are also attracting the customers through accepting Expression of Interest (EOI), wherein the buyer can book a property with a token amount, which stands refundable on cancellation.
Commenting on their analysis, Mani Rangarajan, Group COO, Housing.com, Makaan.com and PropTiger.com, says, “The pandemic has caused a double whammy to the already sluggish sentiments. The reverse migration of construction workforce amid the lockdown would impact the project timelines in the near term, and also impact fresh funding inflows for the developers. However, It is too soon to mark the current scenario as the next normal since some macro indicators suggest a slight recovery from the bottomed-out sentiments.”
“The unemployment rate has reduced post the phased opening of the economy and is nearing the pre-lockdown levels. Credit growth in ‘Housing’ (including priority sectors) decelerated at a slower pace compared to the other sectors in May 2020. Along with this, the RBI’s ‘accommodative stance’ of cutting the short-term lending rate to 4% will have a positive bearing on retail loans and will help to invigorate demand. We believe, that amidst the current white swan pandemic, market sentiments will remain cautious with both supply and demand realigning themselves to the new situation,” he adds.