January 19, 2024: The National Capital Region (NCR) real estate market witnessed a 46% YoY expansion in area sold in FY2023, with total launches nearly doubling to 64 million square foot (msf), according to a report by Rating Agency ICRA. The replacement ratio was at 0.9 times in FY2023, which further reduced to 0.5 times in H1 FY2024 on account of calibrated launches, while sales remained healthy during the period. ICRA highlighted a compressed years to sell (YTS) in NCR to 0.7 years, driven by healthy sales velocity, calibrated launches and low inventory. ICRA predicts the YTS to remain below 1 year as of March 2024, indicating a stable outlook for the residential real estate sector. As of September 2023, the years to sell (YTS) in NCR have decreased from 2.6 years in September 2020 to 0.7 years.
Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said “ICRA expects the area sold in NCR to rise by a mild 1-2% in FY2024, on the high base of FY2023, supported by end-user demand and healthy, albeit moderating, affordability. NCR accounted for 10-14% of the total area sold annually in the top seven cities during FY2017-FY2023 and is expected to be in a similar range in FY2024 and FY2025,”.
According to the report, the unsold inventory reduced considerably from 113 msf as of September 2021 to 57 msf as of September 2023, mainly on account of continued healthy sales traction. Within NCR, Gurgaon has remained the preferred market for homebuyers, with a dominating share of more than half of the total area sold and new launches, followed by Greater Noida and the Noida markets at 18% and 17%, respectively, in FY2023. The Faridabad and Delhi markets have seen very few launches during the last 18 months.
The average selling prices in the NCR increased by about 42% in FY2023, which is the highest among the top seven cities, supported by the increase in contribution from luxury sales, strong demand, low inventory levels and comfortable YTS.
Reddy, added: “The housing sales (in msf) in the NCR market are predominantly leaning towards the luxury segment with ticket size in excess of Rs 2 crore. This segment has seen a steady gain in its share in the overall sales to 56% in Q2 FY2024 from 31% in Q2 FY2021. However, the share of the mid-income segment (ticket size between Rs 0.75-2.0 crore) compressed to 31% from 43% and the share of the affordable segment (ticket size below Rs 75 lakhs) reduced to 13% from 26% during the same period. Going forward, the premiumisation trend is expected to continue, driven by the increase in disposable incomes, desire for larger spaces and changing consumer preferences.”
ICRA expects the overall sales velocity and collections to remain healthy in the coming fiscal. The sales of ICRA’s sample set[1] are expected to grow by 15-17% in FY2024 and about 11-12% in FY2025, while the collections are likely to expand by 19-21% in both FY2024 and FY2025, supported by an expected increase in unit sales, hike in average selling price and a ramp-up in project execution, resulting in an improvement in cash flow from operations.
ICRA cautioned that the gross debt levels may increase by 17-19% in FY2024 and are likely to remain at similar levels in FY2025. Nonetheless, the leverage, as measured by gross debt/CFO, is expected to remain comfortable between 1.70-1.75 times in FY2024 and 1.55-1.60 times in FY2025, supported by healthy cash flows.
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Harini is a content management professional with over 12 years of experience. She has contributed articles for various domains, including real estate, finance, health and travel insurance and e-governance. She has in-depth experience in writing well-researched articles on property trends, infrastructure, taxation, real estate projects and related topics. A Bachelor of Science with Honours in Physics, Harini prefers reading motivational books and keeping abreast of the latest developments in the real estate sector.
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