Did COVID Hit India’s Housing Market? You’ll be Surprised.

General opinion about the housing market’s showing during and after the COVID pandemic pointed to bleak times. The uncertainty caused by the second wave in 2021 slowed down the recovery the market was witnessing after the first wave. But the prolonged slowdown gave way to a surprising recovery aided by a variety of factors. According to Real Insight (Residential): July – September (Q3) 2021, a quarterly analyses of India’s eight prime residential markets by PropTiger.com, demand and supply for residential housing showed significant recovery with a further boost expected in the festive season.

As demand for residential sales picked up post the second wave, a total of 55,907 new housing units were sold in these eight cities during the July-September quarter – an impressive 59% increases when compared to the same period in 2020, as seen in the table below.

Source: Real Insight (Residential) – Q3 2021

Houses under 45 lakh contributed the highest to sales with a share of 40%, followed by the 45-75 lakh price bracket, which contributed 28%. The report notes, “The tremendous jump in sales numbers could also be attributed to the 10-year-low home loan interest rates - home loans are currently available at 6.50% annual interest.”

The report also reveals good new in terms of new supply in India’s top eight residential housing cities. At the end of a prolonged decline, new supply jumped to 66,251 units, which is a staggering 228% jump. The comparative number in Q3 2020 stood at 19,865 units. Mumbai (33%) and Ahmedabad (21%) saw the highest number of quarterly launches in Q3 2021.

Rajan Sood, business head, PropTiger.com said, “Considering housing affordability is at a record high this festive season on the back of 10-year low home loan interest rates and sops offered by some state governments in the form of reduced stamp duties and circle rates, we expect housing markets in the top 8 cities to show solid stability in the ongoing quarter. Though the overall cost of construction has gone up due to the rise in the cost of crucial input materials, rather than seeing an increase in prices, buyers are being offered discounts during the festive season.”

Even as new supply boosted the number of units available for purchase, pressure from the demand side ensured unsold stock stood remained nearly the same at 7,11,215 on June 31, 2021. Due the same reasons, inventory overhang – the estimated period builders in a particular market are likely to take to sell unsold stock at the existing sales velocity – during Q3 2021 declined to 44 months from 48 months in the previous quarter.

The report reveals that NCR market continues to witness high levels of unsold inventory and high overhang. The MMR market had an unsold housing inventory over twice that in the NCR, the inventory overhang for both the markets was 64 months. Data shows that Pune also has a considerably high unsold inventory.

Summing up the positive sentiment, Dhruv Agarawala, Group CEO, PropTiger.com, said “It is now a well-established fact that the notion of property ownership has gained significant currency in the aftermath of COVID and its impact on the way people live and work. Even as this has helped build positive consumer sentiment vis-à-vis residential real estate, support measures by the government and the banking sector have set the ball rolling for a positive change in momentum for the sector.”