Tag: Chief Economist and Head Research & REIS

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Residential sales recover over 90% to pre-Covid levels in Q1, 2021: JLL

Mar 25, 2021 by Neel Achary 0 Comments #Chief Economist and Head Research & REIS, #Dr. Samantak Das, #JLL, #Residential Market Update

Mumbai, March 25, 2021: Residential sales in Q1 (Jan-March) 2021 recovered to more than 90% of the volumes witnessed in Q1 2020 (pre-Covid) across the top seven cities, according to JLL Q1 Residential Market Update – Q1 2021 released today. The cities including Chennai, Hyderabad, Kolkata, and Pune surpassed the sales volumes of Q1 2020. Overall sales increased by 17% on a sequential basis. Importantly, sales either improved or stayed at similar levels (in Q1 2021 when compared to Q4 2020) in majority of the residential markets under consideration. Mumbai has consistently been the largest contributor to sales in the last four quarters. In Q1 2021, Mumbai accounted for 23% of the sales, followed by Delhi NCR with a share of 21%.

However, Kolkata saw the maximum increase in sales activity in Q1 2021 in comparison to the fourth quarter of 2020. In Kolkata, the offtake of residential units in Q1 2021 was driven by South Suburbs (Joka, Kasba, Behala, Jadavpur, Tollygunje) and East Suburbs (EM Bypass, Rajarhat, Topsia) with a combined contribution of more than 70%.

Residential market reached more than 90% of pre-Covid sales

Q1 2020

(in units)

 Q1 2021

(in units)

 Recovery

Sales in Q1 2021 as a proportion of sales in Q1 2020
Bengaluru           4,186           2,382 57%
Chennai           2,453           3,200 130%
Delhi NCR           5,941           5,448 92%
Hyderabad           3,027           3,709 123%
Kolkata           1,259           1,320 105%
Mumbai           6,857           5,779 84%
Pune           3,728           3,745 100%
Total        27,451        25,583 93%

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

Chennai – sales was driven by Southern Suburbs (Perungudi, Pallavaram, Medavakkam, Navalur, Thalambur, Nanganallur) which accounted for nearly 60% of the total offtake during the quarter.

Hyderabad – the Western Suburbs (Gachibowli, Manikonda, Kukatpally) submarket accounted for more than 65% of the sales during the quarter.

Pune – North East (Viman Nagar, Kharadi, Wagholi) and North West (Hinjewadi, Wakad, Baner) accounted for 67% of the sales during the quarter.

 

Sales volume increased across most markets

Q2 2020

(in units)

 Q3 2020

(in units)

 Q4 2020

(in units)

 Q1 2021

(in units)

 Growth (%)

Q1 2021 over Q4 2020
Bengaluru 1,977 1,742 2,535           2,382 -6%
Chennai 460 1,570 2,500           3,200 28%
Delhi NCR 2,250 3,112 4,440           5,448 23%
Hyderabad 1,207 2,122 3,570           3,709 4%
Kolkata 481 390 438           1,320 201%
Mumbai 3,527 4,135 5,026           5,779 15%
Pune 851 1,344 3,323           3,745 13%
Total 10,753 14,415 21,832        25,583 17%

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

“The sustained growth in sales presents clear signs of demand and buyer confidence coming back to the market. This has been on the back of historically low home loan interest rates, stagnant residential prices, lucrative payment plans and  freebies from developers and government incentives such as the reduction of stamp duty in states like Maharashtra and Karnataka (for affordable housing). The ease of lockdown restrictions and the commencement of the vaccination drive have further aided in bringing buyers back to the market,” said Dr. Samantak Das, Chief Economist and Head Research & REIS, JLL.

“In the fourth quarter of calendar year 2020, India’s economy returned to growth territory, recording a 0.4% rise in GDP. In tandem with the GDP growth, the pace of recovery in the residential market intensified with sales increasing by 51% when compared to the previous quarter. In Q1 2021, sales of residential units continued an upward trajectory. Sales, at the overall level, increased by 17% on a sequential basis,” he added

The Covid-19 pandemic tilted the scale further in favor of established developers. As the sector shows signs of recovery, prominent developers are expected to be at an advantage and capture a greater share of the market. Homebuyers have become even more cautious in their home purchase decisions. There is an increased preference for investing in projects by developers with an established track record. Only credible developers, who have execution capability as well as quality products, and conduct their business in a transparent manner will be able to operate in the post-covid era in a sustainable manner. Ultimately, this will lead to greater transparency and improved consumer sentiment in the market.

“The Government is committed to boost affordable housing. The recent Union Budget has extended the benefit of additional interest deduction on home loans for first-time homebuyers in the affordable segment. Further, there is a time extension to claim the tax holiday on profits from affordable housing projects until March 2022. The housing loan going below 7% for the first time in the last decade also triggered sales in all segments in the residential real estate. The buoyancy in the market manifested in the form of low mortgage rates and stable prices are expected to continue and attract fence-sitters and serious end users,” said Siva Krishnan, Managing Director, Residential Services (India), JLL

 

RBI is leading the way to recovery by holding policy rates at historically low levels to initiate a cycle of consumption led growth. As concerns related to jobs and a stable flow of income are alleviated, buyers are coming back to the market to make the most of this ‘great time to purchase a house’.

 

New Launches scale up, focus on affordable homes continues

Q2 2020

(in units)

 Q3 2020

(in units)

 Q4 2020

(in units)

 Q1 2021

(in units)

 Growth (%)

Q1 2021 over Q4 2020
Bengaluru 6,135 1,074 4,335           5,469 26%
Chennai 182 1,487 2,892           5,036 74%
Delhi NCR Negligible 699 2,244           4,734 111%
Hyderabad 5,034 5,396 10,313           8,591 -17%
Kolkata Negligible Negligible 638               583 -9%
Mumbai 2,294 2,242 3,223           4,616 43%
Pune 1,135 1,756 3,140           4,924 57%
Total 14,780 12,654 26,785        33,953 27%

Mumbai includes Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai

Source: Real Estate Intelligence Service (REIS), JLL Research

The first quarter of 2021 witnessed new launches of 33,953 residential units, a jump of 27% over the last quarter of 2020. Hyderabad continued to dominate new launches and accounted for more than a fourth of the overall launches during the quarter. Bengaluru, which formed more than 16% of the new launches followed. The markets of Delhi NCR and Chennai witnessed a substantial increase in launch activity during the quarter. New launches are still at 84% when compared to the pre-Covid levels of Q1 2020. Developers across the markets under review remain focused on the completion of under construction projects and clearing their existing inventory.

Development focus on mid and affordable segments continues in Q1 2021 with 69% of the new launches in the sub INR 10 million categories. In the coming quarters, the focus on these price segments is expected to continue with developers trying to reap the benefits of strong pent up demand in these segments. Most of the new launches in the markets of Bengaluru, Hyderabad, and Pune were in the sub INR 10 million category Bengaluru – 77%, Hyderabad – 76%, Pune – 100%.

Unsold inventory increases marginally

Q4 2020

(in units)

 Q1 2021

(in units)

 Growth (%) – Q4 2020 over Q3 2020
Aggregate (7 cities) 462,380 470,750 2%

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 462,380 units to 470,750 units. Mumbai, Delhi NCR, and Bengaluru together account for 70% of the unsold stock. An assessment of years to sell (YTS) reveals that the expected time to liquidate this stock has increased from 4.2 years in Q4 2020 to 4.6 years in Q1 2021.

It’s a “buyer’s’ market with price continuing a downward trend

 

Residential prices in the majority of India’s residential markets have remained stagnant in the past few years. In Q1 2021, prices remained largely stagnant when compared to the previous quarter, across all the seven markets under review. This being said, it is important to point out that few developers in certain markets are providing moderate price discounts to boost sales. Moreover, developers are offering attractive freebies including payment schemes such as no EMIs for a year, no stamp duty and so on to attract homebuyers who pressed ‘pause’ in the last few months. This has led to a reduction in ‘effective prices. This rationalisation 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 gaining a foothold in their respective markets, prices are expected to be largely range-bound across most of the markets in the short-term.

Sustained growth of the sector expected in 2021

Guided by the expected economic growth trajectory, the uncertainty around the stability of jobs and incomes is only expected to reduce in the coming quarters. This is likely to have a direct positive impact on the housing sector with enhanced buyer confidence.

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Home affordability to improve further in 2021, mid – affordable segment to stay in focus: JLL

Feb 25, 2021 by Rekha Nair 0 Comments #Chief Economist and Head Research & REIS, #JLL India, #MD & India Head, #Residential Services, #Samantak Das, #Siva Krishnan

Mumbai –There has been a sequential growth of 51% in the residential sales during the last quarter of 2020, according to a recent report ‘India Real Estate Outlook – A new growth cycle’’ by JLL. While there is still a long way to go, the worst is behind for the residential sector.

The evolving COVID-19 pandemic has influenced short-term decision making with job security cited as the biggest concern when contemplating the purchase of a home. “In the second quarter of FY 2020-21 when the GDP showed higher than expected recovery, the housing market showed some initial signs of recovery, with sales increasing by 34% on a sequential basis. In Q4 2020, uncertainties around the economy and jobs started reducing, which led to an increase in the pace of recovery in residential real estate. New launches and sales across the seven key markets under review witnessed a significant jump,” Dr  Samantak Das, Chief Economist and Head Research & REIS, JLL.

Expectations from 2021

The challenges faced by residential real estate in 2020 have become the catalyst in providing stimuli to the industry for sustained growth. With people spending more time at home, the lockdown re-established the importance of owning a house. Simultaneously, government initiatives to support the recovery by holding policy rates at historically low levels to initiate a cycle of consumption led growth. This has resulted in extremely low mortgage rates. Prices have also been stagnant for the past few years. This affordable synergy makes it a great time to purchase a home. Furthermore, the market is also witnessing renewed interest from Non-Resident Indians (NRIs) impacted by economic uncertainties in Europe and the Middle East.

“With economy picking up and employment witnessing stability, housing sale is expected to sustain the existing momentum for the year 2021. All segments, which includes luxury, premium, mid-segment housing, and affordable, will see renewed demand from the end users. With the property prices bound to go up because of the rising demand, investors are likely to come back to the market by last quarter of 2021. In short, residential business can look forward to a rounded growth with both supply and demand soaring,” said Siva Krishnan, MD & India Head, Residential Services, JLL India.

Changing homebuyer preferences and product metrics

A healthy lifestyle has become a key criterion for homebuyers, resultantly, preferences have tilted towards larger homes in self-contained complexes with facilities like gym, green open spaces, and access to daily necessities. Moreover, with work from home becoming a reality, product metrics are likely to change.

Customization to suit buyer needs

Apartment with balconies and open spaces to be preferred
Increased importance of study rooms, good network and broadband speed as well as acoustics

Additionally, remote working practices are expected to increase the attractiveness of suburban markets. Suburban markets offer lower density environments and more spacious apartments at affordable rates. Since, travel to office may no longer be an everyday activity, the importance of connectivity to office hubs will no longer dictate home purchases.

Prominent residential developers will continue to adopt a digital first approach

The rapid adoption of technology in Indian real estate is expected to continue with the COVID crisis expediting the entire cycle. As physical interactions are restricted, there has been a significant change in the way activities are carried out.

Digital marketing to become prime channel to market properties and generate leads
Online construction progress monitoring
Property videos will become a necessity instead of a luxury
Use of VR in processes such as site visits and closure of deals
Change in the way site visits happen; videos and virtual walk through to shortlist properties followed by site visits in the final stages of decision making

This uptrend is expected to continue in the times to come. While many may still be reluctant to make such a large purchase without physical site visit, the digital tools that were used in 2020 are sure to stick around throughout 2021.

Focus on affordable and mid-segments to continue

In 2021, a further improvement in sales across all housing segments is expected. However, development focus on mid and affordable segments is expected to continue. In 2020, more than 80% of the new launches were in the sub INR 10 million category. Moving ahead, new launches will remain concentrated in these price segments with developers trying to reap the benefits of strong pent up demand in these segments. The Government is also committed towards boosting affordable housing. The recent Union Budget has extended the benefit of additional interest deduction on home loans for first time home buyers in the affordable segment. Further, there is a time extension to claim the tax holiday on profits from affordable housing projects until March 2022.

Recovery in alternative residential asset classes

The organised shared housing market in India has seen the influx of several organised players in a bid to tap the opportunities arising out of the strong demand from a growing millennial workforce and student population. While the market took rapid strides in the past few years, 2020 brought the co-living and student housing sectors to a grinding halt. As migrant millennial workers move back to the major cities and higher education institutes resume physical classes, occupancy levels in organised setups is expected to go up and gradually return to 2019 levels by the end of 2021. There will be an increased focus on health and wellness aspects in the post-COVD era, which is expected to drive demand for organised co-living and student housing setups.

Moreover, senior citizens living alone were the most impacted during the pandemic. The role of organised senior living facilities, which are designed with senior friendly amenities such as medical support on call, services for food, housekeeping and assistance around the clock became more prominent during these trying times. This has increased the attractiveness of such facilities and demand for organised senior housing setups is expected to pick up in the near future.

Affordable synergy in the market makes it a great time to buy

The increase in home purchase affordability has been one of the most important factors driving sales and paving the way for buyers to return to the market. Residential prices have remained stagnant over the last five years while household incomes have witnessed steady growth. In 2021, even if we assume residential prices in certain markets to move upwards, the mortgage rates are expected to remain at historical lows and annual household incomes will increase as the economy recovers. This will result in improved home purchase affordability, as evidenced by JLL’s Home Purchase Affordability Index. A combination of increased home purchase affordability and improved consumer sentiments will further lead to the translation of pent-up demand into sales.

Developers in the past few years have been focusing on aligning supply with demand. Strong fundamentals in the form of increased demand-supply alignment, increased affordability and transparency, greater demand from end users, good financial health of banks, and the effective implementation of Government reforms such as RERA will support the broader recovery of the residential market in 2021.