People walk past an under construction building in Mumbai. Associated Press
As anticipated, the Covid-19 pandemic has considerable impact on the Indian housing sector. Residential sales saw a 42% y-o-y drop in the first quarter of 2020, reveals the latest data by Anarock property consultants. In Q1 2020, residential sales in the top seven cities stood at 45,200 units, against 78,510 units a year ago. On q-o-q basis, housing sales fell by 24%.
Meanwhile, new launches too fell by 42% annually - from 70,480 units in Q1 2019 to approx. 41,200 in Q1 2020. Q-o-q supply also declined by approx. 21%. Yearly trends indicate that MMR and Pune recorded the maximum y-o-y drop of housing supply - by 61% and 56% respectively - while Chennai and Kolkata actually displayed positive trends with nearly 16% and 8% yearly rise. Perhaps the only silver lining is that developers were able to shed nearly 3% of their unsold inventory in a year - from 6.65 lakh units in Q1 2019 to over 6.44 lakh units in Q1 2020. On a quarterly basis, the decline was just 1%.
Bengaluru and Kolkata witnessed the highest yearly reduction in unsold inventory with 6% each from Q1 2019 to Q1 2020. However, unsold inventory increased by 10% in Chennai in the same period.
Residential property prices across the top cities remained stagnant in Q1 2020 over the previous quarter. On yearly basis too, there was no price movement.
The injected liquidity of Rs3.74 lakh crore along with the 3-month moratorium on all term loans by financial institutions will alleviate short-term liquidity concerns and help developers as well as home buyers survive in these uncertain times. It is a big relief for developers and homebuyers to help them mitigate the challenges faced by them currently.
It is pertinent to note that total outstanding loans of real estate developers from commercial banks, NBFCs and HFCs is estimated to be around Rs4.5 lakh crore as of March 2020. At the same time, this moratorium will definitely benefit homebuyers as these financial institutions have lent an estimated Rs 20 lakh crore as of March 2020, says JLL report.
Can foreign companies buy real estate in India? Are there restrictions while investing in such properties? Please clarify. Demello, Sharjah.
There are restrictions for foreign firms that have an office in India while investing in real estate. A company that has established an office in accordance with FEMA regulations can purchase real estate that is necessary or incidental to carry on its business in India.
At the same time, while winding up the business in India, sale proceeds of such property can be repatriated with the prior permission of the Reserve Bank of India. In the event of establishing a liaison office in India, a foreign company cannot acquire immovable property in India except on lease for upto five years.
I have been working in the Gulf for the past two years. Can I give power of attorney to my relative in India to invest in immovable property? What type of power would be advisable? Pratik, Dubai.
Usually a generally power of attorney is given to execute buying and selling of immovable property in India on behalf of NRIs. There were several instances where relatives or authorised representatives have sold the property without the knowledge of NRIs leading to litigations in the court. As a result the Supreme Court has held that NRIs properties cannot be transferred based on a general power of attorney.
It is advisable to provide a specific power of attorney (PoA) to your relative, if you wish to buy or sell immovable property in India.
Recently a developer from Bengaluru has marketed apartments with lease commitment and assured rental income. Is it safe to invest in such options? Narendra, Dubai.
There has been a surge in demand for rental housing among corporates looking for accommodation of their staff in the vicinity of operations. The developer whom you had referred may have got a mandate to ensure availability of apartments in his project for rental accommodation.
It is safe to invest in such units as investors get return on investments from day one and housing finance companies and banks also offer home loans to invest in such units. However, you will have to look at the lease period, escalation clause in the rent at periodical intervals and other factors to ensure that your interest is protected while leasing the premises.