ICRA has forecasted a 5-6 percent increase in the average sale price of residential properties, attributing this rise to a greater emphasis by real estate developers on launching luxury homes.
On August 7, credit rating agency ICRA Limited presented a stable outlook for the residential real estate sector for the financial year 2024-25. It projected that housing sales in major cities—Mumbai Metropolitan Region, National Capital Region, Bengaluru, Hyderabad, Pune, Kolkata, and Chennai—are expected to see double-digit growth during this period.
ICRA projects that the area available for sale will grow by 12-14% annually, reaching 785-800 million square feet in FY25. This increase is supported by robust end-user demand and healthy, though slightly declining, affordability.
According to the agency’s estimates, average property prices are anticipated to increase by 5-6% in the current fiscal year, compared to an 11% year-on-year rise in FY24. Anupama Reddy, Co-Group Head and Vice President of Corporate Ratings at ICRA, attributed this to a shift in the product mix towards more luxury units and pricing flexibility resulting from strong sales and a reduced inventory overhang.
ICRA observed that demand for real estate ownership is rising in Tier II cities, reflecting trends similar to those in metro areas, particularly a growing preference for premium properties. Additionally, several well-known developers are exploring opportunities in these Tier II markets.
Additionally, launches in the top seven cities are projected to increase by 12% year-on-year, reaching 767 million square feet. This rise is supported by a decade-low inventory, a favorable years-to-sell (YTS) metric, and strong demand, according to the agency.
ICRA highlighted that inventory fell to 687 million square feet in June 2024 from 732 million square feet in March 2023. The years-to-sell (YTS) remained low at 0.9 times as of June 2024, due to strong sales and well-managed launches. YTS is calculated by dividing unsold inventory by sales over the past 12 months.
It highlighted that,the cash flow from operations is projected to rise by 9-11% this fiscal year, while gross debt is expected to increase by 6-7% mainly for land acquisitions. Despite this, gross debt is anticipated to stay manageable at 1.55-1.60 times in FY25.
Rajeshwar Burla, Group Head, ICRA Limited said,"Largely the sales are happening in the under-construction portfolio, ready to move-in is relatively miniscule in the overall scheme of things when compared to what it used to be a couple of years back.”
Reddy noted that the sector has benefited from the SWAMIH Fund, which supports the completion of stressed and stalled residential projects.
He further added that about 10-12% of the projects have received final approval. The initial corpus for the SWAMIH Fund was around Rs.25,000 crore, of which nearly Rs.15,000 crore has been raised to date, aiding in the revival of stalled projects.
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