During the COVID-19 pandemic, the number of houses bought or sold decreased significantly. While demand dropped due to a decline in income levels, construction also reduced due to severe movement restrictions and lack of labour during the first wave. The reduction in both demand and supply led to a sharp decline in housing transactions. The number of houses sold did recover to pre-pandemic levels during the second wave in some cities due to pent-up demand and reduced interest rates on home loans. However, despite a significant decline in housing transactions, the prices of houses did not fall in most major cities. In fact, they increased in many major cities
Transactions fall
The chart shows the change in housing transactions (in %) during the first and second wave compared to the pre-pandemic levels. During the first wave, transactions declined in almost all the cities analysed.
However, during the second wave, transactions increased in several cities such as Mumbai, Hyderabad and Bengaluru compared to the pre-pandemic levels. In cities where transactions declined, the fall was much lower than the first wave.
Chart 1 change in transactions Economic
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Prices unaffected
Interestingly, housing prices did not follow the same trend as transactions during the first two COVID-19 waves. Despite the fall in demand, housing prices increased in several cities during the two waves compared to the pre-pandemic levels.
The chart shows the change in housing prices (in %) during the two waves compared to the pre-pandemic levels.
Chart 2 change in prices Economic survey
Housing loans rise
The chart shows the change in disbursement of housing loans (in %) during the first and second wave compared to the pre-pandemic levels. The growth of housing loans decelerated to its lowest point during the first wave and recovered during the second wave. Lower interest rates on home loans and pent-up demand resulted in an increase in demand for housing loans during the second wave.
Chart 3 change in housing loans Economic survey
Housing demand
The chart shows the % of personal loans in the total loans disbursed (right axis) and the % of housing loans within the personal loans category (left axis). Both the shares are rising. This indicates that banks are lending more personal loans than before. Also, an increasing share of these personal loans is being used to buy houses.
The housing loans considered do not include the credit given to the priority sector.
Chart 4 share of housing loans Economic survey
Source: Economic Survey 2021-22. DBIE-RBI | Note: First wave: April-June 2020, Second wave: April-June 2021
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