Real estate business

The second wave of covid had a moderate impact on residential real estate activity

BENGALURU : Second wave of covid has had a smaller impact on the residential real estate sector, while increased focus on immunization and reopening the economy will help home sales return to pre-levels short- and medium-term covid, the Icra rating agency said in a note Thursday.

In the June quarter, residential real estate sales in the top eight cities fell 19% to 68.5 million square feet from 84.7 million square feet in the March quarter. The sequential decline was on a high basis as the fourth quarter of FY1 saw the second highest sales since FY12.

However, sales more than doubled from 33.7 million square feet in the June quarter of the previous year.

According to Icra, despite the disruption in the March quarter, demand remained intact, driven by multi-year low interest rates, a preference for larger and better homes following the shift to a working model. hybrid and pent-up demand.

“The impact of the second wave was less than that of the first wave due to a variety of factors including the continued trend of working from home by employees, localized lockdown restrictions and a higher degree of certainty regarding levels. future income and stability. The IT-ITeS sector has experienced strong financial performance with an increase in hiring, which has supported demand from sector employees, ”said Kapil Banga, Sector Head and Deputy Vice President of Icra.

Homebuyers look for ready-to-move-in units from developers with a track record of delivering quality, on-time projects, Icra said. This also led to the increase in the market share of the nine main listed real estate players, from 6% of sales in fiscal year 2017 to over 16% in fiscal year 21.

The long-term trend of consolidation, which results from changing consumer preferences as well as a sustained increase in the market share of large developers among recent launches, is expected to continue and will foster further improvement in the market share. of the biggest and strongest developers.

With construction impacted to some extent and lower sales for the top nine listed players, collections were also hit, recording a 27% quarter-on-quarter decline.

In addition, the extension of RERA timelines in some states from six to nine months as well as a reduction in approval costs / construction bonuses provided by some states for a limited period have made it possible to postpone releases in the event of weakness. of the collection.

Thus, despite the moderation of collections, the operating cash flows of the major developers have not experienced a sharp decline.

However, declining market share and a cautious lending approach of NBFCs and HFCs can create a difficult operating and funding environment for small, short-term real estate developers.

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