Economy

Indian house prices to fall 6% this year, shows poll

Reuters Bengaluru | Updated on September 29, 2020 Published on September 29, 2020

Most new housing projects are either unsold or delayed due to the pandemic

Indian house prices will fall more sharply this year than expected just three months ago amid surging coronavirus cases, which are hurting demand in an economy fighting its deepest recession on record, a Reuters poll showed.

Even before the pandemic struck, house prices had declined nearly 1 per cent during the January-March period from the previous quarter, according to Reserve Bank of India data. That is with consumer inflation averaging 6.67 per cent during that same period.

Most new housing projects are either unsold or delayed due to the coronavirus spreading in the country at the fastest rate in the world, causing massive job losses, pay cuts in almost every sector and migration of labour out of top-tier cities.

Gloomy job market

That gloomy job market was likely to hurt demand and already-slowing housing market activity, suggesting a recovery would not come any time soon, according to the September 16-28 Reuters poll of 15 analysts.

The poll predicted average house prices to shrink 6.0 per cent this year and 3.0 per cent next year, which would be the first annual fall since records began over a decade ago. That compares to a fall of 5.0 per cent and 3.0 per cent expected in a poll taken three months ago.

“The Covid-19 impact has hit the residential sector hard and while green shoots are emerging in terms of sales activity, it is largely focused on completed and ready to move inventory,” said Rohan Sharma, head of research at Cushman Wakefield.

“Under-construction and unsold inventory remain under a slight stress.”

In a worst-case scenario, prices nationally were expected to decline 10.0 per cent and 7.0 per cent, this year and next, respectively.

Also read Covid-19 impact: End-users may drive prices, product offerings in realty sector

While house prices were expected to decline, retail inflation held above the central bank's medium-term target range of 2-6 per cent for the fifth consecutive month in August, giving little room for the RBI to support the economy.

Nine of 12 respondents who answered an additional question said the risk to their housing market outlook was skewed more to the downside. Nine of 13 analysts predicted the recovery from the recent slowdown to take at least a year.

“There is still a fair bit of uncertainty on the extent and duration of the disruption caused by Covid-19,” said Aashish Agarwal, head of India real estate at SayeNvest.

“Given the rising number of cases, any re-imposition of restrictions could delay the prospects of recovery and increase pressure to liquidate inventory, even below fair prices.”

A regional breakdown in the poll showed house prices this year would fall 7.5 per cent, 7.0 per cent, 5.0 per cent and 3.5 per cent in Mumbai, Delhi, Chennai and Bengaluru, respectively, compared to 7.3 per cent, 7.0 per cent, 3.0 per cent and 3.0 per cent contractions predicted in the June survey.

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Published on September 29, 2020
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