COVID-19 impact: Housing sales down 37%, office leasing dips 35% in 2020 across 8 cities

Housing sales fell 37 per cent year-on-year during the 2020 calendar year while gross office space leasing declined 35 per cent on low demand because of the coronavirus pandemic, but demand improved significantly in the last quarter to cross pre-COVID level, property consultant Knight Frank India said on Wednesday.

In its 'India Real Estate - Residential and Office Update H2 2020' report released on Wednesday, the consultant reported that sales of residential properties fell 37 per cent to 154,534 units in 2020 across eight cities as compared with 245,861 units in the previous year.

Similarly, the gross office space absorption declined 35 per cent to 39.4 million sq ft from 60.6 million sq ft.

However, both housing sales and gross office leasing during October-December 2020 were higher than the corresponding period of the previous year.

The sales of residential properties in the fourth quarter of the 2020 calendar year rose to 61,592 units from 58,402 units in the year-ago period on pent-up and festive demand, while office absorption increased to 17.5 million sq ft from 16.4 million sq ft.

As per the annual data, housing sales fell in all eight major cities during 2020, with demand falling most in Ahmedabad and least in Pune.

In the office market, Hyderabad witnessed maximum decline in leasing activities and Ahmedabad the least.

Knight Frank India tracks eight property markets -- Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Pune, and Ahmedabad.

In the residential property market, housing sales fell 18 per cent in Pune to 26,919 units during 2020 from 32,809 units in the previous year, while Mumbai saw 20 per cent decline at 48,688 units from 60,943 units.

The Maharashtra government's decision to temporarily cut stamp duty on registration of properties led to higher sales in Mumbai and Pune region during the last four months of the 2020 calendar year, the consultant said.

Housing sales in Delhi-NCR decreased 50 per cent to 21,234 units in 2020 from 42,828 units in the previous year, while demand slumped 51 per cent in Bengaluru to 23,579 units from 48,076 units.

In Chennai, sales fell 49 per cent to 8,654 units in 2020 from 16,959 units in the previous year.

The sales of residential properties in Hyderabad declined 38 per cent to 10,042 units from 16,267 units. Kolkata saw 21 per cent fall in sales to 8,912 units from 11,266 units.

Ahmedabad was worst hit, with sales down by 61 per cent to 6,506 units in 2020 from 16,713 units in the previous year.

"Despite the on-going pandemic, the H2 2020 sales growth in some cities is fairly encouraging.

“In Q3 2020, the real estate market started witnessing revival signs, further recording a significant improvement in home sales during Q4 2020," Knight Frank India CMD Shishir Baijal said.

Out of the total sales number in the second half of 2020, he said Mumbai and Pune contributed around 50 per cent in home sales.

"This marvellous performance can be largely attributed to the state government's decision of reducing stamp duty in Maharashtra.

“The other state governments would need to jump into the bandwagon or offer something similar to bolster demand across their markets," Baijal said.

RBI's decision to maintain low repo rates has narrowed the margin between rent and home loan EMI paid to banks, he said.

Baijal said the sales momentum is likely to continue this year and demanded stimulus measures in the upcoming Union Budget to further boost demand.

In the commercial property market, the office leasing activities in Mumbai fell to 6 million sq ft in 2020 from 9.7 million sq ft in 2019.

NCR saw 4.7 million sq ft of office leasing in 2020 against 8.6 million sq ft in the previous year.

Office leasing in Bengaluru dropped to 12.3 million sq ft from 15.3 million sq ft, while Pune saw demand falling to 3.7 million sq ft from 6.2 million sq ft.

In Ahmedabad, the demand for office space dipped to 1.3 million sq ft from 1.5 million sq ft.

Chennai saw an office absorption of 4.5 million sq ft in 2020 as against 5.2 million sq ft, while Hyderabad witnessed leasing of 6 million sq ft as compared with 12.8 million sq ft.

In Kolkata, too, the demand for office space fell to 0.9 million sq ft in 2020 from 1.4 million sq ft in 2019.

Photograph: Rupak De Chowdhuri/Reuters