RBI shows its study for the residential market disruption with a small price drop in the sector.

According to a study by Reserve Bank of India, the residential real estate market has continued to suffer from weak demand and significant inventory overhang. Due to new launches dropping indicating the broad inventory overhang, all India house price levels moderated with Mumbai and NCR exhibiting a small price drop of almost 5 per cent. But southern cities like Chennai and Bangalore reported price hikes of almost 13-16 per cent.

It is also expected that the COVID-19 pandemic would bring more disruption to the housing industry that has been struggling for existence. A study by Anarock Property Consultants indicates that affordable housing of all categories could be the worst impacted by this. About 6.1 lakh affordable units are being constructed in the top 7 cities, which is 39 per cent of the estimated 15.62 lakh under-construction units. Unsold affordable housing stock could grow annually by 1-2 per cent.

“The COVID19 outbreak would severely affect the affordable housing market, the target audience usually has limited income, and the concerns of unemployment are currently strong,” says Anuj Puri, chairman-Anarock Property Consultants. “It could contribute to postponed property purchasing decisions in 2020 and ultimately disrupt growth momentum in the segment.”

Rating agency India Ratings has also said demand for residential real estate could continue to be suppressed in FY21 given the rising downside risks to economic growth in the country. Combined with increasing uncertainties about credit availability, demand-side risks may contribute to developer refinancing and liquidity risks, the agency has noted.