2 min read.Updated: 01 Jan 2020, 11:10 PM ISTBidya Sapam
Home sales slipped in the latter half of 2019 as consumers held back on discretionary spends amid the overall slowdown in the economy
Sales in the second half of this year declined by 22% over the first six months
Mumbai: Aslowing economy, coupled with the ongoing liquidity crisis, may continue to drain the housing market in 2020. However, builders are optimistic that the market may revive in the later half of the year, riding on government measures.
Home sales slumped between July and December, as consumers held back on discretionary spends amid the economic slowdown. This added to the woes of the residential realty segment.
India’s gross domestic product growth rate (GDP) had dropped to a six-year low of 4.5% in the September quarter, after falling for six consecutive quarters. Sentiment around employment, income and consumer spending has been at the lowest in the last six years, according to a Reserve Bank of India (RBI) survey released in October.
Residential sales in the top seven cities, including Mumbai, Bengaluru, and the National Capital Region (NCR), saw a marginal 5% improvement in 2019 over the previous year, to clock sales of 2,61,370 units. This was led primarily led by affordable and mid-income housing, according to data by real estate consultancy Anarock Property Consultants Ltd. However, sales in the second half of the year declined by 22% over the first six months.
Growth in the housing market in 2020 will depend on the swift execution of government incentives announced this year. In a significant step towards boosting the residential housing market, the government had said it will set up a ₹25,000-crore stressed fund to revive stalled projects.
Delay in the implementation of government sops would further dampen consumer sentiment this year, said Anuj Puri, chairman, Anarock Property Consultants. “If used in a timely manner, these measures will have a positive impact on the real estate sector in 2020. A major part of the residential housing market growth will most likely unfold in the second half of 2020. The financially stronger players will stay ahead in the game," Puri added.
Developers agreed that the revival of residential housing in 2020 will depend on the improvement in liquidity, and on how the overall economy fares in the coming quarters.
“We do not expect that there will be a drastic improvement in the next quarter or so. However, we hope that economic growth would bounce back in the second half of the year (2020). Revival in the economy has always led to housing demand. So growth has to stabilize first," said Venkatesh Gopalkrishnan, chief executive officer (CEO), Shapoorji Pallonji Real Estate.
Many others believe that the establishment of the government’s stressed fund in the year would lead to significant improvement of the real estate market where several projects have been stuck because of lack of funds.
“The ₹25,000-crore stressed fund could lead to a lot more unlocking of capital. Homebuyers and lenders would get their money back. It will also deliver houses, which will create value. This fund could lead to a multiplying impact but the biggest challenge is execution," said Sharad Mittal, CEO, Motilal Oswal Real Estate.
Even as builders pin their hopes on government moves to revive the market, they believe residential housing demand in the country is going to be led by affordable and mid-income housing. Affordability would be key in boosting housing demand, said developers and brokers.
“Prices have softened in the last one year. On a cumulative basis, prices have dropped by 7-8% in certain micro markets in Mumbai and NCR. This could also be through various discounts and offers. So affordability is going to be crucial for builders in the coming months," said Pankaj Kapoor, managing director, Liases Foras, a realty advisory firm.
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