India’s 7 prime residential markets recorded sale of 149 million square foot (msf) of space in the third quarter of the current financial year (Q3 FY2023), says a report by rating agency ICRA. This is the highest quarterly sales recorded in over 10 years, the report released on March 8, 2023, says.
Supported by continued end-user demand and better affordability, the sale area also increased to 412 msf in the nine-month period of this fiscal (April-December 2022) as against 307 msf in the corresponding period last year.
The report also points out that the share of luxury housing has been consistently increasing in the overall sale.
“Post-pandemic, there has been a gradual shift in the overall segment-wise composition with rise in the share of the luxury and mid-segments to the overall sales across the top seven cities. The share of the luxury and mid segments to the overall sales has increased from 14% and 36%, respectively, in FY2020 to 16% and 42%, respectively, in 9M FY2023,” it says, adding that a similar trend was observed in terms of launches as well.
According to Anupama Reddy, vice-president and co-group head, corporate ratings, ICRA, the value of the sale area is expected to grow by 8-12% in FY2023 and further by 14-16% in FY2024. The shift towards larger spaces/upgrade and preference for home ownership is expected to continue, supporting the demand in the mid and luxury segments, she adds.
“Notwithstanding the rate hikes by the Reserve Bank of India during the current fiscal, home loan interest rates are still lower than the peak pre-Covid interest rates and the affordability continues to remain healthy. While low inventory overhang and calibrated launches work in favour of developers, the impact of a growth slowdown on the job market and increase in interest rates on affordability pose risks,” she says.
“While the outflows towards new launches and land investments are likely to increase, ICRA expects the net debt/cash flow from operations to remain healthy at less than two times in the next two years, supported by stable inflows and consequent deleveraging of the balance sheet, Reddy said commenting on the leverage metrics of the sample.
Unsold inventory dips 9% YoY
Due to robust sales, unsold inventory in the 7 cities declined to 839 msf in December 2022 from 923 msf in December 2021. Consequently, the inventory overhang also declined to a decade-low 1.5 years.
Average sale price up 10% in Q3
The average sale price rose by 10% in Q3 FY2023 on a YoY basis, driven by the partial pass-on of increase in input costs, as well as change in the product mix with a higher share of luxury units, says the report.
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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