Housing sales likely to drop 34% in FY21 in volume terms due to pandemic: India Ratings

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New Delhi: Housing sales in volume terms is likely to decline 34% this fiscal because of the COVID-19 pandemic but demand is expected to rise in 2021-22 from a weak base, according to India Ratings and Research.

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% YoY (year-on-year) in FY22 after a 34% YoY decline in FY21,” it said in a statement.

The agency emphasised that the overall sales in FY22 could still be around 14% 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% YoY in the first nine months of this fiscal year, the rating agency said, and expected 34% fall in the entire 2020-21.

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

India Rating said the recovery will likely be dominated by Grade I players, whose sales are likely to grow by 49% YoY in FY22, after a 14% 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,” the agency said.

India Ratings said that lower interest rate on home loans is likely to improve the affordability of house ownership. India Ratings and Research is a fully-owned subsidiary of the Fitch Group.