Real Estate Sector Continues to Receive Setbacks With Moderate Home Prices

The residential real estate sector continued to suffer from low demand and large inventory overhang last year, a Reserve Bank of India study has said.

With new launches of residential projects declining, reflecting the large inventory overhang, all India house price levels had moderated as of end-December, it said.

While Mumbai and the Delhi-National Capital Region reported nearly 5 per cent drop in house prices, southern metros of Chennai and Bengaluru belied the trend with price increase of nearly 13-16 per cent.

Now, the Covid-19 pandemic is expected to cause further disruption in the country’s housing market that has been battling for survival.

A study by Anarock Property Consultants has predicted that affordable housing could be the worst affected among all real estate categories.

“The affordable housing segment will be severely impacted by the Covid-19 outbreak as the target audience typically has limited income and unemployment fears currently loom large,” said Anuj Puri, chairman of Anarock Property Consultants. “This could result in deferred property purchase decisions in 2020 and ultimately derail the segments growth momentum.”

According to Anarock, nearly 610,000 affordable housing units are under construction across the top seven cities in the country, which is 39 per cent of the total about 1.56 million under-construction housing units in these cities.

Unsold affordable housing stock could rise by 1-2 per cent on an annual basis, it said.

Ratings agency India Ratings has also said demand for residential real estate could remain suppressed in FY21 in light of the increasing downside risks to the country’s economic growth.

Demand-side risks, combined with rising uncertainty over credit availability, could add to refinancing and liquidity risks for developers, the agency said in a recent report.

(Source: Economic Times)