Home price increases in FY25 will be moderate, at 5%: India Ratings
According to a survey by India Ratings & Research, the base effect and the many new launches scheduled for FY25 will limit the growth in housing prices to around 5%.
According to the rating agency, residential prices increased 22% year over year at the beginning of FY24 and would be muted at about 5% year over year for FY25.
Prices increased by about 14% year over year in FY23, coupled with a rise in land prices and rental yields, as a result of clearing out the majority of the old stock and liquidating the majority of the current inventory, as well as a sustained increase in demand and spike in commodity prices brought on by geopolitical tensions.
For FY25, India Ratings has maintained a neutral view on the residential real estate market. Affordability and interest rate stability are anticipated to enhance absorption and pricing. It did note that the growth rates are probably going to fall down because to the large base of FY24.
Despite price rises and sticky interest rates, the residential real estate market had a great performance in 9MFY24, with sales growth for the top eight real estate clusters over 25% year-over-year.
Given that prices are rising in most areas, Ind-Ratings projects that pre-sales growth in FY25 would slow to 8% to 10% year over year. According to Mahaveer Shankarlal Jain, director of corporate ratings at India Ratings, “as launches increased, driven by the sharp rise in sales and realisations, inventory levels have also risen over FY24 in the premium and luxury segment.”
India Ratings anticipates continued high buyer interest in the mid-income and upper mid-income sectors, which emerged as the main consumer segments in 9MFY24, accounting for 30% and 28% of total house sales, respectively.
Although demand for the premium and luxury categories increased sharply in 9MFY24, the company predicted that these segments would cool down as a result of the high base and the fact that unsold inventory levels are still high—the most they have been in the previous five years.
