Suspension of construction activities may constrain housing demand: RBI

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 (y-o-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 the 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.