The Real Estate Pile-Up

2020-06-16

A rebound in India?s residential property market will be influenced by the intensity, spread and duration of the COVID-19 pandemic. Government stimulus measures and monetary policy adjustments by the Reserve Bank of India (RBI) will further mitigate the adverse effects of the pandemic and help steady consumer confidence in the residential property market, according to the India Residential Market Update Q1-2020 recently released by real-estate consultancy firm JLL.

The homebuyer community deferred their purchase decisions owing to the evolving COVID-19 outbreak, which led to sales declining by nearly 30 per cent in Q1 2020 on a year-on year (YoY) basis. ?The impact of the ongoing pandemic on business activities became more prominent since the beginning of March 2020 in the country,? adds the report.

However, even though new project launches came to a standstill in March, Q1 2020 witnessed a rise of 3 per cent in new launches compared to the same period last year. Q1 2020 recorded new launches of 40,574 units compared to Q1 2019.

?The COVID-19 pandemic is expected to weaken GDP growth, which is expected to fall below 5 per cent in FY2019-20 and potentially reach 2008-09 levels in FY20-21. However, the residential real-estate market appears to be at an advantageous position today as compared to the Global Financial Crisis, led by a series of structural reforms by the Government in the past five to six years,? says Ramesh Nair, CEO & Country Head, JLL. ?When the COVID-19 scenario stabilises, factors such as better-priced deals, enhanced financial health of banks and greater demand from end-users will aid in improving buyer sentiment. Sales are expected to regain some traction towards the end of 2020 supported by the festive season during that period.?

Owing to the economic slowdown  as a result of the current situation, consumer confidence has also taken a hit, which is having a direct impact on the home-buying decision process.

Lower mortgage rates, combined with other measures taken by the Government to improve sentiment, are expected to arrest this declining trend. These factors will further aid in the recovery of the residential market in India.

 Subdued sentiments weigh in on the offtake of home loans

Source: RBI, JLL Research

Note: Data pertains to housing loan disbursals by commercial banks

Developers have locked-in capital of Rs 3,700 billion

Q1 2020 witnessed an increase in unsold inventory as launches outpaced sales by a significant margin. Unsold inventory increased from 442,228 units in Q4 2019 to 455,351 units in Q1 2020. Moreover, Mumbai surpassed Delhi-NCR to become the market with the maximum quantum as well as value of unsold inventory.

Mumbai accounts for majority of locked-in capital

2019 Q4

2020 Q1

Cities

Unsold inventory

YTS

Unsold inventory

YTS

Value

(Rs billion)

Bengaluru

81,732

3.0

89,122

3.3

640

Chennai
Tags :
Real Estate Developers unsold inventory residential COVID-19 pandemic Reserve Bank of India RBI real-estate consultancy JLL COVID-19 sales COVID-19 pandemic Ramesh Nair Government economic slowdown residential market in India Delhi-NCR Mumbai impact of COVID-19 on the real-estate business Pune Kolkata Chennai Samantak Das Homebuyers economic activity liquidity challenges consolidation

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