Housing sales likely to dip 60% in FY21 due to Covid

Liquidity starved real estate sector is expected to witness a 40-60 per cent decline in residential sales volumes this fiscal due to Covid-19 pandemic, ratings agency says Icra.

According to the agency, the collections from customers are also expected to decline by around 35-40 per cent. Maintaing a negative outlook for the real estate sector, the agency noted that the overall sales volume from completed and under-construction inventory is expected to reduce by 40-60 per cent. "The preference for completed inventory is expected to continue thus favouring the developers having higher proportion of such projects.

However, the steep reduction in home loan rates may aid housing demand to some extent, with home loan interest rates having dropped below 8 per cent for the first time in 15 years," the agency said. It noted that committed receivables from already booked sales have also been impacted, given that some milestone based payments have been deferred due to stoppage of construction activities earlier. Icra also expects the spends on ongoing projects to reduce by around 30 per cent in FY21 on account of the pandemic. "New launches, which were already on a declining trend given the increased focus on deliveries, are likely to get further deferred," it said.

Icra further said the overall project cash flows are expected to be impacted by slower collections leading to reduced inflows.