The pandemic induced lockdown has had a massive impact on the real estate with sales and launches plummeting by 84% and 90% YoY in Q2 2020 across Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Pune, NCR and Ahmedabad. NCR, Chennai and Hyderabad had near zero sales during this period while developers were forced to postpone launches across markets due to labour unavailability and an anticipated drop in demand.
The report found that after two years of stagnant albeit steady demand, housing sales in India across eight markets registered a decline of 54% YoY from 129,285 units in H1 2019 to 59,538 units in H1 2020. New launches also fell the most in H1 2020 compared to any period during this decade at 46%, to 60,489 units.
The eight markets that were reviewed include Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, Pune, NCR and Ahmedabad. This is according to a report on the residential market in India by Knight Frank.
The residential real estate market stands precariously poised with a funding crisis only having worsened in H1 2020. The near-term outlook on sales remains bleak and depends entirely on how the pandemic impacts the economy in the second half of the year, the report suggests.
The Bengaluru residential market had shown resilience in the overall weak residential market in the country over the past few years by recording the fastest sales growth of 27% in 2018 and 10% in 2019 in a group of top 8 cities in the country. However, post the pandemic induced lockdown, the Bengaluru residential market recorded sales decline of 57% YoY in H1 2020, the report says. While all micro-markets were adversely affected, notable decline was seen in the north and west where sales declined by an even greater magnitude of 70% YoY and 66% YoY respectively.
The affordable housing segment, classified as having house value up to Rs 5 million, witnessed its share shrink to 32% in H1 2020 compared to 38% in H1 2019.
Housing sales plummeted by a substantial 67% YoY in H1 2020 to 2,981 units from 8,979 units in H1 2019. This is the lowest recorded sales number for Chennai in the past 10 years. Demand in Chennai residential market had been gradually slowing down since 2015 with a few spurts of growth in between. But H1 2020 is the first time when sales had such a poor show, and a major contributor to this demand slump is the COVID crisis, the report says.
54% of these sales were concentrated in the southern part of Chennai and the highest sales were recorded in the Rs 2.5-5 million ticket size segment. Together with the < Rs 2.5 million segment, these two ticket size categories account for 51% of the total sales in the city in H1 2020. This indicates that demand continues to be concentrated in the affordable housing segment. However, the share of the INR sub-5 million ticket size sales has fallen from 60% in H1 2019 to 51% in H1 2020 in line with the overall slump in demand due to the COVID crisis, the report says.
Housing sales recorded a 43% YoY fall with 4,782 units sold in H1 2020, and this is the lowest recorded sales figure for Hyderabad in this decade, the report says.
After the founding of Telangana in 2014, residential demand in Hyderabad has remained steady until H2 2019. Even during the pre-COVID period of January to March 2020, demand was seemingly on track and was only limited by the low availability of supply. Things took a sharp turn in the aftermath of the COVID crisis and the subsequent lockdowns, the report states.
Some key features of the residential sales in H1 2020 include a rise in demand in the northern and eastern parts of the city, lower share of affordable housing units sold in H1 2020 and the increased traction in the Rs 5-7.5 million ticket size category, as per the report.
West Hyderabad continued to dominate the scene in H1 2020 and accounted for a significant 59% of the total sales activity. Proximity to office locations like Financial District, Madhapur, Gachibowli and Kondapur coupled with the presence of robust infrastructure have been the major pull factors for homebuyers in West Hyderabad, the report states. North and East Hyderabad picked up momentum on the back of the affordable housing sales. North saw a whopping 83% YoY jump in sales in H1 2020.