Indian house prices to fall 6% this year, downside risk (Reuters poll)
BENGALURU (Reuters) – Indian house prices will fall more sharply this year than expected just three months ago amid an increase in coronavirus cases that are squeezing demand in an economy battling its deepest recession on record recorded, a Reuters poll showed.
Even before the pandemic hit, house prices had fallen nearly 1% in the January-March period compared to the previous quarter, according to data from the Reserve Bank of India. That’s with average consumer inflation of 6.67% over the same period.
Most new housing projects are either unsold or delayed due to the spread of the coronavirus in the world’s fastest-paced country – causing massive job losses, wage cuts in almost every industry and a labor migration out of major cities.
This sluggish job market was likely to hurt demand and already sluggish housing market activity, suggesting that a recovery won’t happen anytime soon, according to Reuters poll from Sept. 16-28 of 15 analysts .
The poll predicted average home prices to decline 6.0% this year and 3.0% next year, the first annual decline since the record began more than a decade ago. This compares to a decline of 5.0% and 3.0% expected in a poll taken three months ago.
“The impact of COVID-19 has hit the residential sector hard and while green shoots are emerging in terms of sales activity, they are largely focused on completed inventory ready to move,” said Rohan Sharma, head of research at Cushman Wakefield.
“Inventories under construction and unsold products remain under slight pressure. “
In a worst-case scenario, prices nationwide are expected to drop 10.0% and 7.0% this year and next, respectively.
(Graph: India House Price Outlook)
As house prices were expected to fall, retail price inflation held above the central bank’s medium-term target range of 2-6% for the fifth consecutive month in August, leaving little up to the RBI to support the economy.
Nine of 12 respondents who answered an additional question said the risk to their outlook in the housing market was further skewed downward. Nine of 13 analysts predicted that the recovery from the recent downturn should take at least a year.
“There is still quite a bit of uncertainty over the extent and duration of the disruption caused by COVID-19,” said Aashish Agarwal, India’s real estate manager at SayeNvest.
“Given the growing number of cases, any reimposition of restrictions could delay prospects for recovery and increase pressure to liquidate stocks, even below fair prices.”
(Graph: India Housing Market Outlook)
A regional breakdown of the poll showed house prices this year would fall 7.5%, 7.0%, 5.0% and 3.5% in Mumbai, Delhi, Chennai and Bengaluru, respectively, from 7.3 %, 7.0%, 3.0% and 3.0% of expected contractions. in the June survey.
“The residential segment has been affected due to stagnant demand in most cities,” said Ajay Sharma, Managing Director of Colliers International.
“If the resumption of the holiday season does not occur, the 2020 pricing will continue until 2021,” he added.
Reporting by Indradip Ghosh; Survey by Shaloo Shrivastava and Manjul Paul; Editing by Ross Finley and Bernadette Baum