The COVID-19 pandemic and the subsequent nationwide lockdown hit the economy hard. However, as India unlocks, many key indicators suggest that the economy is on the mend. Real estate is no exception and both the housing as well as the office market are seeing a strong sequential rebound in launches and sales.
Data from real estate consulting firm Knight Frank shows new home launches in the July-September quarter touched 31,106 units in India’s top eight cities, compared with 5,584 units launched in the April-June quarter; that’s a 457 per cent quarter-on-quarter jump.
While year-on-year launches were still down over 47 per cent, residential launches in the third quarter had touched 56 per cent of the pre-COVID levels (quarterly average of 2019).
“In the third quarter, there has been a significant improvement compared to the second quarter, which was actually a complete washout quarter. How close are we in terms of normalcy, then in terms of sales and launches, we are already at around 50 per cent of the pre-COVID levels,” said Rajani Sinha, chief economist and national director—research at Knight Frank India.
Residential sales also saw a sharp sequential improvement with sales touching 33,403 units in the September quarter, compared with just 9,632 units in June. The third quarter sales numbers are 54 per cent of the pre-COVID levels, according to Knight Frank.
The consulting firm’s data shows that five out of the eight cities had recovered more than half of the lost ground, in terms of sales, with Kolkata and Chennai showing 139 per cent and 73 per cent growth compared with the quarterly average in 2019.
The residential market is currently in a “sweet spot” say analysts. Except Hyderabad and Bengaluru, prices in other top metros have corrected 2 per cent to 7 per cent. Furthermore, many developers are also offering attractive promotions and freebies to clear out their inventory. Also, home loan interest rates have fallen sharply. All this means, it could be an opportune time for people, especially those who had been waiting on the sidelines, to buy a house.
“A part of this demand revival is pent up demand, but as the economy starts unlocking further and economic activities resume further, we feel that this growth will be sustained, because going forward, people are going to get more confident about their future income streams,” Sinha added.
Maharashtra last month announced a 300 basis points cut in stamp duty as a part of stimulus measures for the real estate sector. That seems to have had a big impact with Rs 9,000 crore worth home sales estimated to have been registered in Mumbai in September, compared with just Rs 3,500 crore in August and Rs 5,800 crore in September 2019.
The data from Mumbai shows that other states should also follow up and announce similar stimulus measures to give a boost to the housing sector there, say Knight Frank officials.
The office market in India had seen strong demand before the COVID-19 pandemic hit. While the lockdown forced most offices to shift to a work-from-home environment, people have begun to go back to offices as the lockdowns ease across the country.
Office leasing across India’s top eight cities in the July-September quarter surged 80 per cent over the April-June quarter to 0.44 million square meters. New office completion during the same period jumped 126 per cent sequentially to 0.33 million square meters, data from Knight Frank showed.
The total office transactions of the eight markets in the third quarter of 2020 have improved and reached 33 per cent of the 2019 quarterly average level. Chennai, National Capital Region, and Mumbai recorded higher recovery in the September quarter with transactions reaching the level of 57 per cent, 43 per cent, and 42 per cent respectively of the quarterly average of 2019.
“While work from home as a concept has proved to be an effective business continuity measure, we expect occupiers to look at office space usage more strategically. This will lead to further innovation in effective (ways) to include aspects like social distancing, health benefits, sustainability as well as preparedness for future contingencies. We expect the momentum of the transaction to accelerate in the near future,” said Sinha.
