A stable demand, combined with prudent launches by players, had restored some supply-demand balance over FY18-FY19. However, the COVID-19 related lockdown resulted in a rise of the unsold inventory levels to over 15 quarters at end-FY20.
Residential sales were down 5% yoy to 266 million square feet (sf) in FY20 across the top six cities in India.
National Capital Region has seen the maximum decline in FY20; while Bengaluru has seen a recovery, Hyderabad has continued with its strong growth momentum in terms of the area sold.
Furthermore, the affordable housing segment, which grew steadily over FY17-FY19, has seen the maximum decline in during FY20.
The residential sector continues to under-perform as an asset class, impacting the investor demand. Hyderabad is the only market which has shown a price CAGR of a high single digit, while the other markets have lagged behind with sub-par price CAGR of 1%-2% over the last five years.
Moreover, disbursements from housing finance companies and wholesale non-banking financial companies to the real estate sector declined steeply in FY20. However, there was a slight uptick in the last quarter in disbursements by non-banking financial companies, based on Ind-Ra estimates.
The agency believes that the sales will be hampered until the ongoing COVID-19 situation stabilises, and thus cash flows for Grade-I residential players could also come under pressure.