Housing Prices Surge But Sales Up Nearly 60% in India, Says Report

Sales of new housing units went up by nearly 60 per cent in eight cities, including Mumbai, Delhi NCR and Bengaluru in the three months between July and September 2021 as compared to the same period in the previous year, according to a recently released report. However, the overall year-on-year (y-o-y) jump in calendar 2021 was 13 per cent compared to 2020, says a report released by Prop Tiger, a real estate advisory firm, in February.

The Jump

In Q3 2021: Although there was a dip in the first quarter of 2021, the third quarter saw a spike that helped the real estate sector recover. A total of 55,907 new housing units were sold in these cities between July and September 2021. The recovery was in sync with the recovery seen in other sectors after the deadly second wave of Covid receded by the second half of 2021.

In 2021: With a total of 2,05,936 housing units being sold in calendar 2021, overall sales in India’s eight prime housing markets increased 13 per cent compared to the overall sales in 2020. On a year-on-year basis, Hyderabad witnessed an exponential rise.  

“The increase in sale-of-houses has seen an uptrend across metro cities. Hyderabad has already seen an uptick in the first half of 2021. NCR still needs to pick up pace like others since the available unoccupied inventory is still very high. Rest of the cities, Bangalore, Mumbai and Pune, have done well because of the attractive price points, robust customer demand and low EMIs,” says Amit Agarwal, CEO and co-founder of No Broker, a proptech unicorn.  

Growth In New Supplies  

Apart from a spike in the sale of housing, various new housing projects were also launched in the third quarter of 2021. A total of 2.14 lakh units were launched in 2021 compared to 1.22 lakh units in the preceding year, registering a spike of 75 per cent, finds the report.

In terms of new launch of housing projects, Ahmedabad witnessed the highest spike, as the number of new launches in the fourth quarter in 2021 was almost five times the number in the same quarter of 2020, finds the report.  

Price Rise Continues   

The report finds that the price is also rising simultaneously. One of the major reasons for that is consistent increase in the prices of raw materials, finds the report. The price of per square foot area on an average has gone up by 6 per cent on y-o-y basis in 2021.  

While the price hike is least in Pune, with a 3 per cent rise, it is highest in Hyderabad and Ahmedabad that witnessed a rise of 7 per cent each in 2021. 

Factors Leading To Rise In Housing Sales

There are several factors that have led to the rise in housing sales despite soaring prices.

Flexible Payment Mode: The report says that various flexible payment plans have motivated buyers to invest in under-construction homes, which made up for 80 per cent of the home sales during the year.  

Low Home Loan Rates: With unchanged repo rates, home loan rates in India are currently at a 10-year low. “Sale of houses have been up in the second half of 2021 due to better mobility among people, and less fear around Covid. This has been strongly accompanied by still-attractive prices offered by property sellers and builders. The home loan rates are at rock-bottom, making the buying-decision much easier,” says Agarwal.  

More Availability Of Unsold Stocks: As on September 30, 2021, builders in India had more than 7 lakh unsold stock units across the eight residential markets. On top of that, new supply numbers have been added to the overall number of units available for purchase.

The inventory overhang—the estimated period builders in a particular market are likely to take to sell off their unsold stock at the existing sales velocity—during Q3 2021 declined to 44 months from 48 months in the previous quarter. “This decline in the inventory overhang can be attributed to the upswing in demand during the quarter, which is likely to improve further in Q4. This may lead to further reduction in the inventory overhang during the festive season,” states the report.

Positive Consumer Sentiment: After the Covid second wave, the Indian economy is gradually recovering. Moreover, there has been growing consumer demand as well. On top of that, the festive seasons in the last quarter of 2021 also influenced consumers to spend in real estate, states the report.

“It is now a well-established fact that the notion of property ownership has gained significant currency in the aftermath of COVID and its impact on the way people live and work. Support measures by the government and the banking sector have set the ball rolling for a positive change in momentum for the sector. In combination, these two factors have helped drive the demand and supply metrics upwards during the July-September quarter of 2021,” says Dhruv Agarawala, group CEO, Housing.com, PropTiger.com and Makaan.com, real estate platforms.