RBI’s FSR attributes sales to pent-up demand, stamp duty cuts, interest rate drop
In an indication that the worst may be over for the retail real-estate sector, the level of unsold housing inventory has hit a 24-month low. According to RBI data, unsold inventory levels have come down to about 7 lakh units on March 31, 2021, from about 8.5 lakh units in FY20 first quarter.
Though the RBI data is up to March 31, reports by private real estate players suggest that the momentum has continued in subsequent months. A recent report by property consultant Anarock showed that housing sales in the second quarter of calendar 2021 stood at around 24,570 units across the top seven cities, increasing by 93 percent annually.
Though the RBI data is up to March 31, reports by private real estate players suggest that the momentum has continued in subsequent months. A recent report by property consultant Anarock showed that housing sales in the second quarter of calendar 2021 stood at around 24,570 units across the top seven cities, increasing by 93 percent annually.
“The slowdown in the housing market witnessed even before the onset of the pandemic bottomed out in the first quarter of 2020-21. During the third and fourth quarter of 2020-21, residential housing property registration and sales across major cities exceeded their pre-pandemic average levels. This was aided by stamp duty cuts by some States; unmet demand during the Covid-19 related restrictions in H1:2020-21; and moderation in interest rates,”
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Even with lower inventory, it could take more than 45 months to clear the backlog compared to about 27 months two years ago, said CARE Ratings. “The pandemic has impacted the livelihood of several households in terms of expenditure incurred on treatment and preventive medication. Focus on savings rather than investing in big-ticket property will work towards moderating demand. There was already an overhang of debt burden in terms of the moratorium that was provided last year. Therefore, it will be interesting to see how demand plays out, especially in the mid-segment,” it said.
Rising commodity prices
CARE ratings also flagged rising commodity prices that could put pressure on the cost of the project, in turn, impacting prices and buying. The All-India House Price Index (HPI) increased 2.7 percent in the fourth quarter of 2020-21 vis-a-vis 3.9 percent growth a year ago. On a sequential basis, the all-India HPI growth moderated to 0.2 percent in the Q4 of FY21.
“A concern here is the spike in global commodity prices which has been witnessed even in India. The cost of construction has gone up as the price of steel, cement, copper, aluminum products and sanitary wares have been increasing. This will tend to put pressure on the cost of the project which can pressurize prices,” said Care Ratings.