RBI study shows house price moderation

Mumbai: The residential real estate sector has continued to suffer from low demand and large inventory overhang, as per a Reserve Bank of India study. With new launches declining reflecting the large inventory overhang, all India house price levels moderated with Mumbai and NCR showing a modest drop in prices of nearly 5 per cent. But southern metros like Chennai and Bangalore showed price increase of nearly 13-16 per cent.

The COVID-19 pandemic is also expected to cause further disruption in the housing market which has been battling for survival. A study by Anarock Property Consultants shows that affordable housing could be the worst affected among all categories. Nearly 6.1 lakh affordable units are under construction across the top 7 cities, which is 39 per cent of the total 15.62 lakh under-construction units. Unsold affordable housing stock could rise by 1-2% on an annual basis.

“The affordable housing segment will be severely impacted by the COVID19 outbreak, the target audience typically has limited income and unemployment fears currently loom large,” says Anuj Puri, chairman – Anarock Property Consultants. “This could result in deferred property purchase decisions in 2020 and ultimately derail the segments growth momentum.”

Rating agency India Ratings has also said that demand for residential real estate could remain suppressed in FY21 in light of the increasing downside risks to the country’s economic growth. Demand side risks combined with rising uncertainty over credit availability could add to refinancing and liquidity risks for developers, the agency has noted.

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