The Indian real estate market is on the path of redemption, March quarter data shows. Out of the two main divisions, the residential area is showing robust recovery while the office sector remains stagnant, as the coronavirus may have killed the office concept.
The graphs for both residential and office segments had curved up from the troughs of the lockdown-induced June 2020 quarter. Sales of houses in tier-I and tier-II cities, which research firms typically cover, registered strong growth. This was driven by factors such as a cut in stamp duty by some states (Maharashtra and Karnataka), low home-loan rates, and discounts from builders on top of static or declining prices.
Different firms are estimating different figures in their coverage. For the March 2021 quarter, Anarock put it at 29% on a year-on-year basis and Knight Frank at 44%. The data is suggesting that the residential sector is recovering and witnessing a higher volume of sales. In the office segment, there has been some growth but it has not reached the level it was before the pandemic. In the quarter to March 2021, Jones Lang LaSalle put net absorptions (new space taken up minus old space given up) at 36% lower than March 2020 levels, Cushman & Wakefield 49% lower.
The residential market also saw some enthusiasm from the builders, There were many new launches of properties. Compared to the December quarter, the number of new houses entering the market increased 18%, according to Anarock. Greater Mumbai, Pune and Delhi NCR accounted for about 70% of these launches. Further, about 30% of launches were in the affordable housing segment (the price of up to ₹40 lakh, as per Anarock) and 43% in the mid-end ( ₹40-80 lakh).
With new launches marginally exceeding sales for the quarter, the combined inventory of unsold houses in the seven main markets increased 1% to 642,000 units, shows data from Anarock. The inventory overhang covers a wide range. In Delhi NCR, it is 85 months. In other words, at the current rate of net absorption (sales minus new launches), it will take 85 months to clear the stock of unsold houses. In Bengaluru, it’s 28 months. New launches and the inventory overhang will put pressure on builders to hold prices.
The past year has been a buyer’s market. On the one hand, there’s a glut of unsold houses, including a large pool of ready houses, which carry lower risks of ownership. On the other hand, prices in six of the seven leading markets have either been stable or have declined. According to data from real estate portal 99acres.com, 30% of the 537 localities tracked by it across these seven markets saw prices decline in the March 2021 quarter over the March 2020 quarter. For another 43% localities, the price increase was only up to 5%.
Hyderabad was the exception. Among the seven markets, it recorded the highest growth in residential sales in the March 2021 quarter, as per all research reports. Further, this growth was accompanied by a rise in prices in most of the 32 localities in Hyderabad tracked by 99acres.com.