The residential real estate segment has witnessed a sharp recovery in Q2 FY2021, post a severe decline in Q1 FY2021. The Covid-19 pandemic had triggered one of the worst demand crashes that the Indian residential real estate industry, witnessed in recorded history. Overall the housing sales volume witnessed a Y-o-Y decline of 50% in H1 FY2021 across the top eight cities of the country. However, sales volume bounced back considerably with a Q-o-Q growth of 60%, recorded across property markets in the second quarter of the current fiscal. As per an ICRA note, the recent improvement was primarily driven by a gradual unlocking of the economy, pent-up demand; and improved affordability on the back of reduced home loan rates and attractive payment schemes/discounts.

Commenting further on the positive trend, Shubham Jain, Senior Vice President and Group Head at ICRA, said, "An increasing focus on home ownership, both from domicile residents as well as the NRIs, has been aiding sales. Reverse migration has further supported an increase in housing demand in tier II/III cities. Notably, increasing digitisation has played a key role in enabling sales in the current environment, with extensive use of digital marketing and digital engagement tools by the developers aiding online home sales and transaction payments. The crisis has thus pushed the sector towards widespread technology integration."

"Going forward though, sustainability of the uptrend and its drivers remains to be seen. Moreover, with the Q2 FY2021 sales still remaining 37% lower than the levels recorded in Q2 FY2020, a return to pre-Covid sales levels also remains a key look-out area. ICRA continues to expect the overall financial and operational performance of real estate developers to be adversely impacted in the short term due to the escalated demand risks, lower collections, and Covid-related disruptions in project execution. Developers with adequate balance sheet strength, available liquidity, financial flexibility, refinancing ability and a well-diversified project portfolio are expected to be better positioned during this crisis. Consequently, the trend of market consolidation is likely to accelerate, with range-bound prices and low home loan rates expected to continue supporting sales for established players," added Jain.