Real Estate May Come Out Of The Shadows Of CoronaVirus; Growth In Residential Sales Points In This Direction

The real estate sector may finally come out of slowdown gloom in the aftermath of the coronavirus pandemic. In fact, sales have already started to pick up in some segments such as residential areas with developers pushing promotions. “From almost Nil sales in April, residential sales are up to 25-50% of pre-COVID levels as per management commentary in the media. Developers have used a combination of online sales promotions, financing schemes,” Jefferies said in a research report on Tuesday. Affordability also led to rise in sales of the mid-income housing segment which indicates that the current pricing is largely being accepted.

While construction activity has also touched 25-50% of pre-COVID levels, new launch activity is expected to remain standstill with both developers and customers focusing on finished inventory. “New launch activity is yet to revive, with both developers and customers looking for existing completed or near-completion inventory. We expect new launches to start in 2Q, led by the mid-income segment, but pick-up pace only in Q3,” the report said. These inventories are concentrated in the mid to mid-premium segment of the market and the traditional buyer of these inventories is salaried employees who have seen limited impact on their income levels. However, the realty companies may look into offering 2-5% limited discounting in the mid-segment. As far as high-end sales are concerned, they may take longer to revive as availability of home-loans is also an issue with income disruptions.

Real estate has been facing a prolonged slowdown with various issues dampening the sales for developers. The woes of the realty sector were aggravated by a liquidity crunch with the fall of NBFCs and then by economic slowdown which also trickled to automobile sales and FMCG demand such as oil, soaps and biscuits. Certain government measures such as the compliance costs of policy initiatives and reforms (such as demonetization and GST) haven’t helped either, Pankaj Pal, President — Business Development & Strategy, AIPL, wrote recently in Financial Express Online. All of these factors combined translated into lacklustre demand and pent up inventories pan-India.

(Source: Financial Express)