Residential property sales activity has surpassed pre-COVID level and the sector has witnessed a sharp recovery in Q2 FY2021, according to ICRA, a rating agency.
The agency noted that there was a huge decline of 50 percent in H1 FY2021 across the top major cities of the country. However, sales volume bounced back with QoQ growth of 60 per cent in the second quarter of the current fiscal.
According to the agency, the COVID-19 pandemic has triggered one of the worst demand crashes that the Indian residential real estate sector witnessed in recorded history.
"With the higher pace of recovery for advanced stage or completed inventory, this segment contributed to over half the pan-India sales generated in Q2 FY2021."
As per the rating firm, the current improvement was majorly driven by a gradual reopening of the economy, repressed demands, affordable and mid/upper-mid segments on the back of home loan rates reduction and attractive discounts and payment schemes.
Shubham Jain, Senior Vice President and Group Head at ICRA, said "An increasing focus on home ownership, both from domicile residents as well as the NRIs, has been aiding sales. Reverse migration has further supported an increase in housing demand in tier II or III cities.”
Also, digitization has played a pivotal role in aiding online home sales and transaction payments in the current scenario. The agency further noticed that home buyers are looking for rightly priced inventory at advanced stages of construction.
"While quarterly average sales for under-construction units registered a decline of 78 per cent during H1 FY2021, a significantly lower decline of 29 per cent was noted for advanced stage or completed projects," the agency's note said.
It further cited that the home buyers’ preferences in combination with the significantly higher supply of under-construction units vs advanced stage units is most likely to pose challenges for developers who are highly dependent on sales from under-construction inventory.
"However, demand for under-construction units will remain supported to some extent by buyers preferring staggered payment, parallel plans of liquidating other holdings, etc."
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Source: ICRA
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