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Housing Sales May Crash 34% This Year On Covid Tremors

India Ratings study estimates sharp K-shaped recovery in demand in the next fiscal

Housing sales are likely to decline 34 per cent in volume terms this fiscal because of the Covid-19 pandemic. An India Ratings and Research study, however, predicts a surge in demand in 2021-22 from a weak base.

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 The agency expects the residential real estate sector to stage a sharp K-shaped recovery in the next financial year. “The overall floor space sold is likely to increase by 30 per cent YoY (year-on-year) in FY22 after a 34 per cent YoY decline in FY21,” it says in a statement. It emphasised that the overall sales in FY22 could still be around 14 per cent below FY20 level.

The total residential floor space sold in India remained largely stagnant at 326 million sq ft in 2019-20. The floor space sold declined 41 per cent YoY in the first nine months of this fiscal year, the rating agency says, and expects 34 per cent fall in the entire 2020-21.

India Ratings notes that Grade I players or large real estate firms have managed to buck the trend. Their market share expanded to 15.6 per cent in the first nine months of this fiscal year as they managed to report a 4.3 per cent YoY increase in sales despite the pandemic.

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India Rating said the recovery will likely be dominated by Grade I players, whose sales are likely to grow by 49 per cent YoY in FY22, after a 14 per cent YoY increase in FY21.

“India Ratings and Research expects the performance of the residential real estate sector to improve in FY22 from a weak base currently. Grade I players are likely to see a surge in growth from a moderately strong base, while non-Grade I players are likely to see a reversal of the sharp decline experienced in FY21,” says the Fitch group subsidiary.

India Ratings says that lower interest rate on home loans is likely to improve the affordability of house ownership.

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