India’s residential real estate sector is expected to sustain steady growth over this fiscal and the next, as sales and demand stabilize following three years of strong post-pandemic recovery, according to an analysis by CRISIL Ratings.

The report, covering 75 major real estate companies that account for ~35% of national residential sales, projects a compound annual growth rate (CAGR) in sales volumes of 5–7%, with average prices rising 4–6%. This translates to a steady 10–12% growth in value terms.

Demand Revival Supported by Lower Rates and Premium Housing
Last fiscal, demand remained flat, weighed down by higher capital values and delays in launches due to elections and regulatory changes in some states. However, the current and next fiscals are expected to see demand rebound on the back of:

• Improving affordability as interest rates soften
• Sustained appetite for premium and luxury homes
• Normalization of project launches across key micro-markets

“The premium and luxury segments in the top seven cities have seen their share of launches jump from 9% in 2020 to 37% in 2024,” said Gautam Shahi, Director, CRISIL Ratings.
“This trend is expected to continue, with premiumisation driving 38–40% of launches in 2025 and 2026.”

Premiumisation Redefining New Supply
In contrast to the rising prominence of premium housing, the affordable and mid-segments are expected to decline further, largely due to rising land and input costs that have rendered these categories less attractive to developers.

Launch Share by Segment (%):

Supply Still Outpacing Demand
Developers had already ramped up launches over the past three years, leading to supply outpacing demand. As this trend continues, inventory levels are expected to increase slightly:

• From 2.7–2.9 years in the past two fiscals
• To 2.9–3.1 years over the current and next fiscal

Deleveraged Balance Sheets and Strong Collections Underpin Stability
Despite the supply overhang, developers’ credit profiles have strengthened significantly due to:

• Robust collections from strong sales
• Timely project execution
• Adoption of asset-light development models (joint ventures, joint developments)
• Substantial equity inflows, especially through qualified institutional placements (QIPs)

In fact, the QIP proceeds as a percentage of outstanding debt rose from 13–16% in the preceding three fiscals to 24% last fiscal, reflecting growing investor confidence.

Debt Metrics at a Healthy Level

“The continuing improvement in cash flow from operations and rising equity inflows have strengthened credit metrics,” said Pranav Shandil, Associate Director, CRISIL Ratings.
“The debt-to-CFO ratio is projected to improve to 1.1–1.3 times this fiscal and the next, down from 1.2–1.5 times previously and significantly below the ~5.6 times seen in FY20.”

Key Credit Metrics Snapshot:

Outlook: Prudent Leverage, Controlled Inventory Key to Stability
While the outlook remains positive, CRISIL notes that developers’ ability to maintain moderate leverage and control inventory will remain critical for sustaining credit strength.

The report underscores that premiumisation, improved affordability, and healthy cash flows will drive steady growth—albeit at more moderate rates compared to the surge seen in the immediate post-pandemic years.

Also Read: ICRA and CRISIL enhance Commercial Paper limits of Godrej Properties Limited to INR 2000 crore

The post Residential Sales to Maintain Steady 10–12% Growth Path: CRISIL Ratings appeared first on Square Feat India.

On the back of significant momentum in the residential property market, housing inventory overhang across the top 7 cities plunged to just 20 months by Q1 2023-end, from 42 months by Q1 2018-end – reaching the lowest in the last five years. ANAROCK data shows that the inventory overhang in the top 7 cities in the last five years was the highest by Q1 2020-end, at 55 months.

Inventory measured in months indicates the number of months it will take for the current unsold housing stock on the market to sell at the current absorption rate. An inventory overhang of 18-24 months is normally considered healthy at any given period.

Anuj Puri, Chairman – ANAROCK Group, says, “Among the top 7 cities, NCR remained the frontrunner in reducing overall inventory overhang in the last five years – from 66 months in Q1 2018 to approx. 23 months in Q1 2023. This is the best the region has seen in the last five years. In fact, inventory overhang in NCR had peaked at 88 months in Q4 2020.”

Source: ANAROCK Research

“In Q1 2023, the top 7 cities recorded all-time high sales of more than 1.14 lakh units,” says Puri. “The quarter broke all records and breached the 1 lakh units mark for the first time. Strong homeownership sentiment, relatively lower home loan rates, strong momentum in luxury housing and the anticipation of further price hikes were major factors in boosting housing sales, bringing down the overall residential inventory overhang across the top cities.”

The cumulative unsold stock in the top 7 cities saw a 12% decline in the last 5 years – from 7,13,400 units by Q1 2018-end to approx. 6,26,750 units by Q1 2023-end.

Top Hotspots – MMR & NCR

• Among the top 7 cities, NCR saw the maximum 5-year inventory reduction – by 43 months (from 66 months by Q1 2018-end to approx. 23 months by Q1 2023-end). This region was the third-best housing sales performer in Q1 2023.  
• In MMR, the inventory overhang has shrunk by 34 months in this period, attaining an all-time low of 21 months in Q1 2023. MMR recorded the highest sales among the top cities, with approx. 34,690 units sold in the quarter – an increase of 182% against same period in 2018.

Other Cities

• Bengaluru currently has the lowest inventory overhang (of 13 months) among the top cities. It is one of the most resilient residential markets in the country. In Q1 2021 during the pandemic, Bengaluru’s inventory overhang stood at 28 months – the lowest among all cities then, as well.
• Hyderabad’s inventory overhang reduced to 21 months in Q1 2023, from 23 months in Q1 2018. Despite Hyderabad adding the second-highest new supply in the last one year, the current inventory overhang reflects healthy sales in this period.
• Pune’s inventory overhang stood at 20 months as of Q1 2023-end. It was 40 months in same period of 2018 and reached 43 months in Q1 2021.
• Chennai too saw a considerable drop in its inventory overhang – from 36 months in Q1 2018 to 20 months in Q1 2023.
• Kolkata’s residential inventory overhang has dropped from 46 months in Q1 2018 to 20 months as on Q1 2023-end.

Also Read: Investment inflows in Indian realty rise 37%YoY in Q1 2023; Office continues to lead the rally

The post <strong>Q1 2023-end Housing Inventory Down to 20 Months from 42 Months in 2018</strong> appeared first on Square Feat India.