Surprise Surge In Home Sales As Incentives Lure Buyers, Says Crisil

A pedestrian walks past residential and commercial buildings under construction in the Worli area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Home sales saw a surprise surge in the last couple of months, buoyed by incentives from state governments, according to Crisil Research.

Sales jumped in key markets to pre-Covid levels, Crisil Research said in a report. The number of residential units sold in Mumbai and the rest of Maharashtra, for instance, were 1.1-1.3 times higher during the period compared with January, it said.

Affordability across India's top 10 cities improved by up to 35% over the past five years, given favourable interest rates and reduction in property prices, Crisil said. Developers also offered 3-7% discounts in the first half of the fiscal. In addition, according to the report, reduction in stamp duty further improved affordability.

Maharashtra and Karnataka reduced stamp duty on real estate transactions to help the sector battered by the pandemic. Maharashtra lowered the levy from 5% to 2% up to December 2020 and to 3% for January-March 2021, the report highlighted. Karnataka reduced it from 5% to 3% for properties priced between Rs 21 lakh and Rs 35 lakh, it said.

That aided the September quarter earnings of listed developers, according to the report. The second quarter saw better-than-envisaged growth, and in most cases bookings for these players touched pre-Covid levels, Crisil said.

Developers in southern India performed better than their peers across India, it said, because of the larger presence of branded developers in the region.

The decline in profit in the first half of the ongoing fiscal for top seven listed developers—Sobha Ltd., Prestige Estate Projects Ltd., Mahindra Lifespace Developers Ltd., Godrej Properties Ltd., Brigade Enterprises Ltd., Oberoi Realty Ltd., Kolte Patil Developers Ltd.—has ranged between 10 and 20% compared with 50-60% for those in top 10 cities, Crisil said, indicating a shift towards bigger developers.

“On a full-year basis, we estimate overall primary sales to witness a decline of 40-50% in top 10 cities,” the report said. “With ‘ready to move' inventory constituting 10-20% of the total inventory in key cities and upcoming supply this fiscal at similar levels, capital values are likely to remain under pressure at least for the rest of this fiscal.”