India’s 7 prime residential markets recorded the highest sale numbers during the first half of the current financial year (H1FY23) when compared to the past 10 years, says a recent report by rating agency ICRA. Supported by continued end-user demand and better affordability, home sales in the 7 cities during the April to September period increased 49% in H1 FY2023 to 259 million square foot (msf) when compared to the same period last year.
Launches also appreciated 18% year on year with new supply of 199 msf during the 6-month period. The unsold inventory level dipped to 823 msf as on September 2022 from 914 msf as on September 2021. Consequently, the inventory overhang for the unsold inventory is the lowest in the last one decade at 1.5 years.
The 7 cities covered in the analysis include Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region, National Capital Region and Pune.
“ICRA expects the residential demand to remain firm, primarily supported by the aspiration for home ownership/upgrade and healthy affordability, which is expected to keep pace with the increase in the EMI burden…Notwithstanding the rate hikes by the Reserve Bank of India (RBI) during the current fiscal by 225 bps, the interest rates would remain lower than the peak interest rates witnessed in the past,” said Anupama Reddy, vice-president and co-group head, corporate ratings, ICRA.
The rating agency expects developers to be wary of the demand-supply dynamics in the sector and maintain a calibrated launch pipeline, keeping the overall inventory levels under check, Reddy adds.
Property prices rise 12% YoY
Average sale prices in the 7 cities increased by almost 12% in H1 FY2023 on an annual basis, driven by a partial pass-on of the higher commodity prices as well as the change in product-mix with higher share of premium and luxury units.
This price increase may cause additional stress on developers for whom profit margins are already thinning.
“While affordability continues to remain healthy, the continued significant hike in interest rates could constrain the ability of the developers to pass on the increase in input costs to the customers in its entirety, thereby affecting their profitability. Nonetheless, the collections are expected to remain strong and while the outflows on new launches are likely to increase, ICRA expects the net debt/cash flow from operations to remain healthy at less than 2 times in the next two years,” said Reddy.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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