Amritsar, NFA Post: Sentiments across the Indian residential market seems to be recuperating, as home sales in the top eight cities around the country have risen 7% on year during the December quarter, according to a report by rating agency ICRA.
Following the Covid-19 outbreak, home sales had dipped by 62% during the June quarter.
ICRA said that the recovery in the real estate sector was aided by stable prices and falling home loan rates during the pandemic.
The home loan rates are not at a historic low of around 7%, and the central and state governments have also taken multiple measures to aid affordability and stimulate demand.
“While the increase in GDP (gross domestic product) per capita has outstripped the increase in housing prices, which has resulted in some improvement in affordability over the years, overall affordability remains low, with an average house estimated to cost around 44 times the GDP per capita in FY21,” ICRA Senior Vice President and Group Head Shubham Jain said.
“In recent quarters though, reduced home loan rates, attractive payment schemes, or discounts, and reduction in stamp duties in certain key states on the back of covid-19 has significantly brought down housing costs and stimulated housing demand,” Jain added.
The government, in May, had extended the credit-linked subsidy benefit for the middle housing segment by a year to March 2021. Some states, such as Maharashtra and Karnataka, also extended the 2-3% cut in stamp duty for a limited time, which helped housing registrations reach all-time highs.
To further improve affordability, the Maharashtra government had also reduced construction premiums for developers by 50% up to December 2021. In order to avail this benefit, the developers must pay stamp duty on behalf of buyers. This in turn will reduce the stamp duty charges to 0% for the buyer.
ICRA estimates showed that the reduction in stamp duty from 5% before pandemic to 0% now will result in savings of 10 lakh rupees for someone who is buying a house worth 2 crore rupees. This might help boost demand further in the region.
“Mumbai has among the highest construction premium levies in the country, with such premiums typically amounting to 10-15% of the selling price. As per ICRA estimates, even after paying stamp duty on behalf of buyers, the developer will still gain by up to 4.5% of the selling price, which would result in improved project viability,” ICRA said in its report.