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Photo: Mint

Home sales need more than a virus scare to recover

The pandemic has worsened the slowdown in India’s housing sector. However, home sales picked up in Q2, on the back of stagnant prices, lower interest rates and pent-up demand, even as they remained lower than 2019 sale levels. Mint explores the state of India’s real estate.

The pandemic has worsened the slowdown in India’s housing sector. However, home sales picked up in Q2, on the back of stagnant prices, lower interest rates and pent-up demand, even as they remained lower than 2019 sale levels. Mint explores the state of India’s real estate.

What kind of recovery have home sales seen?

The surprise surge in new home sales in September and October made the pandemic-led disruption look like a mere blip. Units sold in Mumbai Metropolitan Region are 1.1-1.3 times higher compared with January, as per a Crisil report. The spurt is led by reduced stamp duty from 5% to 2% up to December and to 3% for January-March 2021 in Maharashtra. Karnataka, too, has reduced the duty. Overall, home sales recovered sharply in Q2 in all top cities, sequentially. However, they remained much lower than last year. “Price correction, unlike anticipated, remained a far cry," said Maneesh Upadhyaya, chief business officer, 99acres.com.

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Are sales led by ready to move-in houses?

In recent years, homebuyers have started preferring ready homes given the massive delays that projects across cities have suffered. That trend is likely to continue. Mumbai-based Lodha Group said it has clocked 1,000 crore of sales in October alone, led by ready homes. Bengaluru developers said 60-65% of customers still prefer homes that are either ready or would be completed in six months, to avoid risks and delays. In the post-covid scenario, sales are being led by buyers either moving out of rented homes or looking at slightly larger places as both work-from-home and online classes have to be accommodated.

Lagging revival
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Lagging revival

Are developers rolling out fresh deals to spur sales?

From easy payment plans, zero GST and stamp duty, and deferred EMI schemes, developers are leaving no stone unturned. MMR developers, in particular, amped up these offerings during the festive season. One of the biggest catalysts has been drop in stamp duty, aided by developers’ offer to absorb the rest. A reduction in home loan rates to historic lows has also pushed sales.

Are large developer brands selling better?

As the residential sector shows early signs of recovery, larger or branded developers may be at an advantage. Many developers who postponed project launches to H2FY21 expect sales to gather pace then. Large developers are also tweaking projects to make them more affordable, given that the sub- 1 crore category continues to see maximum sales traction. The preference for established developers has also propelled DLF to embark on a new development plan and sales cycle to create a mid-income housing portfolio.

Will we witness a drop in prices henceforth?

That seems highly unlikely. Prices have remained stagnant in most cities. In MMR, weighted average price stood at 12,057 per sq ft in Q2, around 1% down from Q1 and 3% lower than last year. Developers said they will be forced to increase prices by 10-15% next year because of shrinking margins. Affordability across top 10 cities has improved by up to 35% over past five years, given favourable interest rates and reduction in property prices, Crisil said. Also, the affordability uptick in MMR, NCR and Pune is higher because of pricing pressure

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