Residential Real Estate Prices in India Expected to Rise by 4-6% This Year: CRISIL Report
The Indian residential real estate sector, like many other industries, has faced its fair share of challenges over the past few years. From the economic slowdown exacerbated by the COVID-19 pandemic to regulatory changes and shifting consumer preferences, developers and investors have had to navigate a complex landscape. However, amidst these challenges, there are signs of resilience and cautious optimism, as indicated by a recent report from CRISIL Ratings.
According to the report, residential real estate prices in India are projected to witness a moderate increase of 4-6% this year. This forecast is underpinned by a confluence of factors that are expected to support housing demand and affordability across the country. One of the primary drivers of this anticipated growth is the rise in per capita income, which has the potential to boost purchasing power and stimulate demand for housing.
Additionally, moderating inflation and stable commodity prices are expected to contribute to the conducive economic environment. These factors, coupled with a lower fiscal deficit and a potential decline in global policy rates, are likely to set the stage for interest rate cuts in the latter half of the financial year. Such rate cuts would not only make home loans more affordable but also improve overall affordability, following a period of sharp increases in interest rates and capital values in the preceding years.
A noteworthy trend highlighted in the CRISIL report is the significant market share growth expected for 11 listed real estate developers in India. The report forecasts that their combined market share is set to double to 30-32% this year, compared to just 15% in the pre-pandemic fiscal year 2018-19. This growth trajectory is attributed to several factors, including the ongoing trend of premiumisation in the market, improved affordability, and rising per capita income levels among Indian consumers.
Furthermore, the report underscores the performance expectations for large, listed residential developers, who are projected to achieve a 10-12% growth in sales volume this year. This follows an estimated growth of 14% in the previous year, indicating a sustained momentum in the market. The report highlights that these developers have bolstered their credit profiles through robust sales and collections over the past two years. Moreover, they have adopted asset-light models such as joint ventures and joint development to enhance their financial resilience and strengthen their market position.
In terms of supply dynamics, the report notes a notable shift towards mid-to-premium and luxury housing segments. Launches in the affordable housing segment are expected to remain subdued, with the share of launches in the mid-to-premium and luxury segment estimated to range between 55 to 60% for the fiscal year 2023-24. This shift reflects evolving consumer preferences and the increasing focus of developers on catering to the demand for higher-end housing options.
The CRISIL report suggests an optimistic outlook for the residential real estate market in India, suggesting that the sector is poised for moderate price growth and sustained momentum. As the economy continues to recover from the impacts of the pandemic and regulatory reforms take effect, developers and investors are expected to capitalize on emerging opportunities and drive the next phase of growth in the sector.
