PremiumNew Delhi: The coronavirus pandemic led to an up to 7% decline in average housing prices in top six Indian cities in the last three months, said a new report on Thursday.
The average housing prices declined by 2-7 per cent year-on-year during July-September in Delhi-NCR, Mumbai, Chennai, Pune, Kolkata, and Ahmedabad on lower demand amid COVID-19 pandemic, according to Knight Frank India.
Prices, however, increased in Bengaluru and Hyderabad by 3 per cent and 4 per cent, respectively, during July-September 2020 compared with the year-ago period.
Chennai saw the maximum fall of 7 per cent, followed by Delhi-NCR and Pune at 5 per cent.
Rates dipped 3 per cent each in Kolkata and Ahmedabad, while Mumbai witnessed 2 per cent price correction.
The weighted average prices in Q3 2020 registered a year–on–year (y-o-y) decline in six of the eight markets, the consultant said.
"Hyderabad and Bengaluru were the only markets that witnessed a price increment of 4 per cent and 3 per cent y-o-y respectively, as developers in these pre-dominantly end-user markets sustained pricing power in a favourable demand-supply scenario," Knight Frank India said in its report released on Thursday.
According to the report, housing sales stood at 33,403 units during July-September of this calendar year, which is 3.5 times higher than 9,632 units recorded in the previous quarter.
“There has been a meaningful improvement in sales and launches in Q3 2020. Developers have been focusing on liquidating inventory and homebuyers inclined to purchase ready assets has translated into reduced unsold inventory levels in this quarter," Knight Frank India CMD Shishir Baijal said.
For markets such as Mumbai and Pune, he said the additional push by the state government in the form of reduced stamp duty has helped in demand generation.
"Going forward, the festival season will be crucial for developers. This may prove to be an opportune time for end-users with adequate financial stability to make their investments. The near-term outlook on sales continues to depend on the speed and trajectory of recovery in the economy in the months ahead," Baijal said.
The total residential sales of the top eight markets under review during Q3 2020, reached 54% of 2019 quarterly average. Similarly, residential launches in Q3 2020, improved to 56% of the 2019 quarterly average. Mumbai, Bengaluru and NCR accounted for 56% of the quarterly sales volume during Q32020 compared to 62% in 2019, primarily due to a fall in Bengaluru’s share in total sales for the same period. Kolkata was the only market that exceeded the quarterly average of 2019 in both parameters with sales and new launches increasing to 137% and 139% respectively compared to Pre-COVID levels, albeit on a low base.
Sales improved compared to April-June period as developers offered financial benefits, discount and easy payment options to attract buyers. Lower home loan interest rate also supported pick-up in residential sales, the report said.
Builders adopted digital tools to engage with customers. The acute labour crunch experienced in the earlier part of the lockdown also started to ease out, as workers began to return to main cities seeking employment.
"Even while there is a considerable distance from normality, the residential sector has started to show signs of improvement in Q3 2020," the consultant said.
In comparison with Q2 2020, the report observed gross office leasing across these cities witnessed a strong recovery, registering 80% growth to 0.44 mn sqm in Q3 2020. Whereas new office completions during the same period, reported recovery of 126% to 0.33 mn sqm, compared to Q2 2020.
The total office transactions of the eight markets in Q3 2020 have improved and reached 33% of the 2019 quarterly average level. Chennai, National Capital Region (NCR), and Mumbai recorded higher recovery in Q3 2020 with transactions reaching the level of 57%, 43%, and 42% respectively of the quarterly average of the year 2019. New completions also improved to 29% of the 2019 quarterly average. In terms of new completions in Q3 2020, Ahmedabad was the only market to report higher new office completions, 125% of quarterly average levels of the year 2019.
In terms of rental values, the recovery in office transactions and new completions helped rental values remain stable in Bengaluru (4%) followed by Hyderabad (2%), Chennai (0.5%), and Pune with 0% Year-on-Year growth (YoY).
“The commercial office asset class performance for the third quarter have been encouraging especially when benchmarked against quarterly average of 2019 as office transactions were at a historic high in that year. At the beginning of the pandemic in India, businesses were compelled to move to work from home as a business continuity process method. The uncertain business environment that followed the initial lockdown, further caused occupiers to assess their office space strategies leading many to postpone their office expansion plans till Q2 2020. However, with the unlocking in progress, going forward as India edges back economic recovery, the office market dynamics are also expected to improve. The recent success of REITs can be understood as an indicator of long – term confidence of investors for office space," said Baijal.
