The second Covid-19 wave during April and May of 2021 was more devastating than the first, severely stressing healthcare systems. To curtail the cases, there were subsequent localised lockdowns imposed across most top Indian cities, which affected site visits and thereby residential sales.
In short, the second wave seriously dented the stupendous q-o-q growth trends witnessed in the Indian residential sector since July 2020. In fact, the January to March period in 2021 was one of the best periods for the housing market since early 2019. Anarock data indicates that Q1 2021 saw housing sales jump 29 per cent against the pre-Covid period Q1 2020 to 58,300 units across the top seven cities.
At the same time, new launches rose 51 per cent in the same period, to 62,130 units. We were expecting this momentum to continue in the upcoming quarters as well, but the second wave put paid to those prospects. Unlike during the first wave, people feared venturing out and buyers went into a wait-and-watch mode. Among the most financially affected were buyers within the affordable and mid segments. In many cases, hefty hospital bills and salary cuts/job losses caused much financial constraints on those who would have otherwise used their savings for buying a home.
Amid these hard times, the April-June quarter saw over 58 per cent decline in housing sales across the top seven cities, to 24,570 units against the previous quarter, while new launches decreased 42 per cent to 36,250 units in Q2 2021. Most of the top cities including MMR, Pune, NCR, and Bengaluru were severely impacted and housing market activity went down significantly. However, in comparison to the first wave in the April to June period of 2020, the impact was far less.
Signs of revival
Amid the quarterly decline in residential activity in Q2 2021 due to the second wave, the silver lining was that construction activity across cities didn’t come to a grinding halt like it had during the first wave. Construction was permitted, albeit with some caveats.
The need to own a home amid the pandemic-like exigencies has been the key factor driving home sales recently. There is structural demand for housing by first-time homebuyers, the growing urge among millennials to own a home rather than rent, and those seeking to upgrade to a bigger home
Moreover, we also began to see some green shoots of revival from June onwards. If we look closely at numbers in the April to June period, June was the best performing month. All three months together saw total housing sales of approximately 24,570 units across the top 7 cities. Of this, around 50-60 per cent were sold in June alone, around the time when the second Covid peak began to abate. This was followed by around 30 per cent in the month of April. The month of May — when the second wave was at its peak — saw the least activity of anywhere between 10-20 per cent. It also varied from city to city depending on when states began to impose lockdowns and restrictions and subsequently ease them.
This monthly trend clearly reflects that buyers are once again back. The month of July is also showing positive trends with activity picking momentum across cities. Various factors are responsible for the gradual turnaround.
The need to own a home amid the pandemic-like exigencies has been the key factor driving home sales recently. There is structural demand for housing by first-time homebuyers, the growing urge among millennials to own a home rather than rent, and those seeking to upgrade to a bigger home. This demand coupled with various other factors — stamp duty cuts, low interest rates, developer discounts and offers, bottomed out property prices, etc. have also prompted homebuyers to seal the best deal as overall property acquisition costs went down. That said, now — amid rising inflationary trends of input costs — developers are gradually beginning to raise prices in a few of their projects.
These are unprecedented times, and many developers are constantly restrategising to stay afloat. They were far better prepared in the second wave than the first. Given that housing is the a fundamental necessity which has gained even more significance amid the present exigencies, we are already beginning to see recovery in the third quarter of CY 2021. Despite the prevailing uncertainties, genuine buyers with the financial wherewithal are coming forward to seal the best deal before property prices rise any further. Most large cities have already unlocked, and even the vaccination drive has picked up significant momentum. So, we are hopeful that sales will rise again like before.
Moreover, we saw that the residential sector bottomed out in 2020. While 2021 is expected to fare better than 2020, it is unlikely to reach 2019 levels. Going forward we anticipate residential real estate to attain a new peak by 2023.
— The writer is Chairman, Anarock Property Consultants