Residential real estate demand set to decline in FY20

The economic slowdown, along with COVID-19 pandemic is likely to have a negative impact on the demand of residential real estate across the country, as per India Ratings.

After showing a slight improvement in the last financial year, the residential real estate demand is expected to go down again in the financial year 2019-20 (FY20).

“Residential demand could remain suppressed in FY21 as well, given the increasing downside risks to the country’s economic growth, projected at 5.5 per cent, should the COVID-19 outbreak sustain through first quarter of FY2021,” said India Ratings.

According to the agency, the demand-side risks along with the increasing uncertainty over credit availability for the sector could add to refinancing as well as liquidity risks for the industry.

However, the agency also noted that the unsold inventory levels are likely to remain stable at around 14 quarters in FY20 and FY21.

Hyderabad and Pune have the least inventory, while Chennai has the maximum unsold inventory. Residential sales across the top six cities also fell down by 4 per cent year-on-year (yoy) to 204 million sq ft in April-December of FY20 from 279.6 million sq ft in FY2019.

In the nine-month period of FY20, The National Capital Region saw the maximum decline. On the other hand,in terms of the area sold, Hyderabad continued with a decent growth trend.

Additionally, the affordable housing segment (homes valued up to ₹50 lakh), saw the maximum decline in April-December FY20.

“Residential sector continues to underperform as an asset class impacting the investor demand,” said India Ratings.

“Grade-I residential players continue to generate strong sales due to the ongoing market consolidation,” it added.

“Pre-sales for top 10 listed players grew about 7 per cent yoy in 9MFY20 to 21.3 million sq ft. However, the sales and thus cash flows for these players could also come under pressure, if the coronavirus outbreak intensifies in the country,” it concluded.

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