Suspension of construction activities since March may constrain housing demand: RBI report

The suspension of construction activities across the country from mid-March is likely to delay completion of under-construction housing projects and may constrain new demand, the RBI’s Financial Stability Report (FSR) said. With the COVID-19 outbreak, demand and liquidity constraints intensified in the housing sector, it added.

“With the suspension of construction activities across the country from mid March, completion of under-construction projects is likely to be delayed, constraining new demand,” the FSR said.

House sales and launches, which had declined by 16 per cent and 35 per cent (yo-y) during the third quarter of FY20, were pulled down by around 26 per cent and 51 per cent respectively, during the fourth quarter, it added.

It said a nation-wide ebbing of consumer confidence triggered a preference for purchase of completed houses, which adversely affected the sale of under construction houses.

As new house launches plunged, the stock of unsold houses shrank and the inventory overhang (or average number of months required to sell a house) dropped, the report said. Under-construction projects constitute 70- 80 per cent of the unsold inventory. House price growth remained contained in most cities in 2019-20, it added.