Residential sales up 51% in Q4 vs Q3 2020; Seven key cities witness an uptick – JLL

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  • Mumbai is the largest contributor to sales, accounting for 23% in Q4 2020
  • Pune saw the highest jump in sales at 147% (QoQ)
  • Q4 2020 witnessed 26,785 new residential unit launches, more than twice the new launches witnessed in Q3 2020
  • Over 80% of the new launches are in the sub INR 10 million (INR 1 crore) category

MUMBAI, India, Dec. 24, 2020 /PRNewswire/ — India’s residential sector is seeing an acceleration in sales leading to a fast paced recovery from the impact of the pandemic. Residential sales accelerated by 51% in Q4 as compared to Q3 2020. It is important to note that this improvement has been holistic with seven key residential markets showing an uptick in sales. Mumbai, the country’s largest contributor to sales for this quarter accounts for 23% of the overall sales, while the Delhi NCR market accounts for 20%. Pune saw the maximum increase in sales activity as compared to the third quarter at 147% with 3, 323 units sold in all.

Sales volume swelled across markets

Q1 2020
(in units)
Q2 2020
(in units)
Q3 2020
(in units)
Q4 2020
(in units)
Growth (%)
Q4 2020 over
Q3 2020
Delhi NCR5,9412,2503,1124,44043%
*Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai.
Source: Real Estate Intelligence Service, JLL Research

“GDP in the July-Sep quarter of 2020 showed higher than expected recovery. During the same quarter, the housing market showed some initial signs of recovery as well, with sales increasing by 34% on a sequential basis. In the backdrop of issues like job security and fall in income levels, this uptick in sales was a significant achievement. The fourth quarter has witnessed a 51% improvement in residential sales, and not just that, the improvement has been evenly spread among all seven cities,” said Ramesh Nair, CEO and Country Head, India, JLL. “The housing market is set to chart a new chapter of growth in 2021, fuelled by affordability, reinforced desire to own a house and renewed interest from certain buyer segments such as NRIs,” he added.

Residential market recovery on track; achieved more than 50% of 2019  sales

City2019 (in units)2020 (in units)Recovery (%)
2020 as a proportion of 2019
Delhi NCR29,01015,74354%
 *Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai. Source: Real Estate Intelligence Service, JLL Research

Seven key cities saw recovery gains of more than 50% in 2020 with Hyderabad, Mumbai and Delhi NCR gaining maximum foothold as compared to 2019.

  • In Hyderabad, the Western Suburbs accounted for more than 70% of the overall sales
  • In Mumbai, sales was driven by Thane and Navi Mumbai, with a combined contribution of over 50%
  • In Delhi NCR, Noida and Ghaziabad accounted for nearly 80% of the sales

“As the sector shows signs of recovery, prominent developers are expected to be at an advantage and capture a greater share of the market. Given that the affordable and mid-segments (sub INR 1 crore) continue to witness maximum sales traction, select developers are also reviewing their projects to make them more aligned to buyers, both in terms of product and pirce. Additionally, buyers are unwilling to take any risks and are showing higher preference for completed projects, or projects where significant construction is underway. The Central Bank is leading the way to recovery by holding policy rates at historically low levels to initiate a cycle of consumption-led growth. As income levels come back to normal, more buyers will come to the market to make the most of this time,” Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL.

The translation of this demand into sales will primarily hinge on enhanced consumer confidence, which in turn depends on the continued implementation of progressive government policies amidst the gradual revival of the Indian economy at large.

New launches, new hope

Q4 2020 witnessed 26,785 new residential unit launches, more than twice the new launches witnessed in Q3 2020. New launches in Q4 2020 increased in all markets under review, when compared to Q3 2020. Bengaluru and Delhi NCR saw a substantial increase in launches during the quarter. Hyderabad dominated new launches accounting for nearly 40% of the overall launches during the quarter and Bengaluru followed with over 16%. This being said, it is important to note that new launches are still restricted when compared to the pre-COVID levels. Developers across markets focused on completion of under construction projects and clearing existing inventory.

New Launches witness increased momentum

CityQ1 2020
(in units)
Q2 2020
(in units)
Q3 2020
(in units)
Q4 2020
(in units)
Growth (%)
Q4 2020 over Q3
Delhi NCR3,021Negligible6992,244221%
*Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai.
Source: Real Estate Intelligence Service, JLL Research

On an annual basis, overall launches across the top seven cities dipped by 31% to about 95,000 units in 2020 as compared to about 137,000 units in 2019. Development focus on mid and affordable segments continued in Q4 2020 with more than 80% of the new launches in the sub INR 10 million (INR 1 crore) category. Moving ahead, the focus on this price segment is expected to continue with developers trying to reap benefits of strong pent up demand in this segments. Most of the new launches in the southern markets of Bengaluru, Chennai and Hyderabad were in the sub INR 10 million category.

Unsold inventory increases marginally

Q1 2020
(in units)
Q2 2020
(in units)
Q3 2020
(in units)
Q4 2020
(in units)
Growth (%)
Q4 2020 over Q3 2020
Aggregate (top 7 cities)*455,351459,378457,427462,3801%
*Top 7 cities include Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata.Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai.
Source: Real Estate Intelligence Service (REIS), JLL Research

As new launches outpaced sales, unsold inventory at various stages of construction across the seven markets under review increased marginally from 457,427 units to 462,380 units. Mumbai and Delhi NCR together account for more than 50% of the unsold stock. However, an assessment of years to sell reveals that the expected time to liquidate this stock has marginally increased from 4 years in Q3 2020 to 4.2 years in Q4 2020. If sales continue its recovery path coupled with limited new supply for the next few quarters, the market is only expected to gain with attractive deals for homebuyers while delivering stable returns to developers.

A buyer’s market with prices facing downward pressure

Residential prices in a majority of India’s residential markets have remained more or less stagnant in the past few years. Developers are operating with very low margins and the chances of further reduction in prices are very remote. In Q4 2020, prices remained largely at levels similar to that of the previous quarter, across all seven markets under review. This being said, it is important to point out that few developers in select markets are providing moderate price discounts to kickstart sales thereby facilitating cash flows to tide over the crisis in the short term. Moreover, developers are offering attractive incentives including payment schemes such as no EMIs for a year, no stamp duty etc. to attract homebuyers who pressed ‘pause’ in the last few months.

This has led to a reduction in effective prices. The rationalization combined with reduced home loan rates has further improved affordability in the residential market. As developers continue to focus on recovering the volumes lost amidst the pandemic and gain foothold in their respective markets, prices are expected to be largely range-bound across most of the markets.

Expectation 2021: What more needs to be done

The government made necessary and timely interventions through liquidity infusion, fiscal support and reform driven investments in the initial leg of relief measures. Further, the Central Bank and the Central Government rolled out other critical measures including loan moratorium, relaxation of NPA classification norms, one-time restructuring of corporate and personal loans (including home loans), etc. These measures and concessions have definitely helped in enhancing consumer sentiment, thus boosting consumption, resulting in increased traction in the real estate sector. While we have seen a continuance of recovery in the fourth quarter which started in Q3 2020, the actual market transaction volumes continue to be lower compared to pre-COVID levels. In this context, JLL believes that the following additional measures will aid in spurring consumption, investment; thus, resulting in a sustenance of a recovery led growth in the next few quarters.

  • Accord ‘Industry status’ to the real estate sector
  • Extension of benefit u/s 80EEA to avail additional INR 150,000 interest deduction on home loans to the following:
    • Existing homebuyers who have already availed home loans
    • First time homebuyers to include mid segment as well
  • Separate provision for deduction of ‘principal repayment’ on home loans
  • Restriction on setting-off loss from residential property against other heads of income at INR 2,00,000 to be removed
  • Reduction in holding period of REITs for long-term capital gains
  • Allow 100% FDI in completed residential real estate projects through the automatic route

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