HomeNewsHousing cycle is on the cusp of a turnaround: Report

Housing cycle is on the cusp of a turnaround: Report

According to a report prepared by broking house, Edelweiss Research, housing cycle is on the cusp of a turnaround. Housing demand momentum is presently very strong and due to various factors, this momentum is likely to be maintained in the coming months too. Affordability, falling inventory, ample liquidity and various measures announced by the government – all have contributed to the demand bounce back.

“Over the past decade, a combination of muted price appreciation, lower interest rates, rising income levels and smaller unit size have greatly improved affordability. In fact, affordability – defined as the house price-to-income ratio – is the best in past two decades,” says the report. Improvement in affordability is across the board and not restricted to a few cities. This has been one of the major drivers for improving housing demand in the country.

Also, since CY16, absorption has consistently eclipsed supply. This has led to a steady reduction in unsold inventory in the system. In fact, by H1CY21-end, unsold inventory had declined to 30 months, the lowest since CY12. The pace of inventory liquidation appears all the more stark if one takes into account the number of stalled projects in the country. Adjusting for stalled projects, the NCR is the only region where unsold inventory is more than 24 months. All other areas, including the MMR have unsold inventory at 24 month or less. Pune has just 13 months of unsold inventory.

“With inventory levels falling, it is no surprise that prices have started rising. Over the past few quarters, many developers have hiked prices. This is the first time in many years that we are witnessing an uptick in prices,” says the report.

Ample liquidity currently in the system is also one of the reasons for changing fortunes of the property sector. Further, at a time when the pandemic has impacted economic growth adversely and the country is struggling with historically high levels of unemployment, the government is rightly supporting the realty space to ensure the sector plays its part in new job generation, said the report.

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