In a recent report related to Indian Real Estate, it was projected that home prices in India are anticipated to witness a modest increase of 4-6 percent this year. Despite this, the rise in per capita income is expected to bolster demand, presenting a positive outlook for the housing sector. The report, conducted by CRISIL Ratings, highlights several key factors contributing to this projection, including moderating inflation, stable commodity prices, a lower fiscal deficit, and a potential decline in global policy rates. These factors are likely to pave the way for interest rate cuts, thereby stimulating housing demand.
According to the report, the capital values are expected to exhibit range-bound growth, coupled with a potential moderation in interest rates during the second half of the financial year. This, in turn, would lead to improved affordability, which has witnessed a decline over the past two financial years due to sharp increases in interest rates and capital values.
Moreover, the market share of 11 listed real estate developers in India is projected to double to 30-32 percent this year, compared to 15 percent in the pre-pandemic Financial Year 2018-19. Leading developers such as DLF Limited, Brigade Enterprises, Godrej Properties, and others have established a reputation for timely and quality delivery, contributing to this market share expansion.
CRISIL Ratings emphasized the significance of “continuing premiumization”, affordability, and rising per capita income in driving sales growth for large, listed residential developers. It is anticipated that these developers will achieve a growth rate of 10-12 percent in sales volume this year, following an estimated growth of 14 percent last year.
Pallavi Singh, associate director at CRISIL Ratings, noted that large developers have strengthened their credit profiles through deleveraging balance sheets and adopting asset-light models such as joint ventures and joint development. This strategic approach has helped these developers navigate through challenging market conditions over the past two years.
In terms of real estate supply, there has been a notable shift towards mid-to-premium and luxury homes, with launches in the affordable segment expected to remain subdued. The share of launches in the mid-to-premium and luxury segment is estimated to range from 55 to 60 percent for the financial year 2023-24, compared to 30 to 35 percent before the pandemic, as highlighted in the report.
Overall, the Indian real estate market is poised for growth, driven by factors such as affordability improvements, rising per capita income, and strategic initiatives undertaken by leading developers. With a positive outlook for the housing sector, stakeholders can anticipate favorable opportunities and trends in the coming years.