Uncompleted residential apartments in Greater Noida, near New Delhi. Photo: AFP

India’s housing sector has been one of the worst hit due to the Covid-19 induced slowdown and is expected to decline 34% this fiscal year but stage modest recovery in the next fiscal year, says India Ratings and Research.

The Fitch Group subsidiary says that in 2021-22 the overall floor space sold could go up by 30%, but it will be 14% lower than the pre-Covid levels.

In the fiscal year 2019-20 the total floor space sold was 326 million square feet. It declined 41% year-on-year for the first nine months and is projected to fall 34% for the whole year.

India’s lockdown to arrest the spread of virus had disrupted the real estate sector at many levels. The buyers were not keen to make purchases, due to travel restrictions; the project timelines got affected, because many of the workers left for their hometowns; and there was a shortage of raw materials, due to the disruption of supply lines. The industry started showing signs of stability around the latter part of 2020 during the festival season.

However, India Ratings noted that the large real estate firms or Grade I players have managed to buck the slowdown and said future real estate growth will be driven by these players. Even during this difficult period their growth for this fiscal is expected to be 14% and for the coming fiscal year it is likely to surge 49%. As for smaller companies or non-Grade I players, they will face a sharp decline this fiscal and recover in the next.

India Ratings said that lower interest rate on home loans is likely to improve the affordability of house ownership.

Studio apartments

The coronavirus has also affected the sales of studio apartments. A studio is a single room that serves as living room, bedroom and kitchenette.

According to Anarock Property Consultants, of the 884 projects launched in 2020 in seven major cities, 130 offered studio apartments (a 15% share). In 2019, of the 1,921 projects in the same cities, 368 (19%) offered studio apartments.

Anarock noted that the number of studio apartments on offer has been steadily rising since 2013 and peaked in 2019. The pandemic has reversed the trend as people started working from home and children began taking online classes. Popularity “also suddenly shifted from expensive central locations to the more cost-effective suburbs and peripheries,” it noted.