Residential sales in top cities expected to witness double-digit growth

ICRA expects the average sale price (ASP) to increase further by 5-6% in FY2025

Rating firm Information and Credit Rating Agency (ICRA) expects residential sales in the top seven cities to witness a growth of 10-12 per cent in FY25, driven by strong end-user demand and healthy, albeit moderating, affordability.

Despite the moderation in the sales growth rate, overall sales velocity, collections, and inventory position are estimated to remain healthy, the rating firm said in a statement.

The top seven cities are Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Bengaluru, Hyderabad, Pune, Kolkata, and Chennai.

Launches are expected to rise by 12 per cent year-on-year (Y-o-Y) to 767 million square feet (msf) in FY25 on an aggregate basis across the top seven cities, supported by decadal low inventory, comfortable years-to-sell (YTS), and healthy demand.

Anupama Reddy, co-group head and vice president, corporate ratings, ICRA, said, “With epic sales and low leverage, the dream run continues for residential real estate players. Residential sales witnessed healthy growth of 19 per cent Y-o-Y in FY24. Sales consistently reached new peaks in each successive quarter over the past eight quarters (except Q1 FY24 and Q1 FY25, given that the first quarters are traditionally laggards) despite elevated home loan interest rates and rising property prices. The area sold in the top seven cities in Q1 FY25 witnessed moderate growth of 7 per cent Y-o-Y due to lower launches, which have been deferred to subsequent quarters.”

Meanwhile, gross debt is expected to increase in FY25 by 6-7 per cent, driven by new business development and the increase in construction finance debt due to a ramp-up in project execution.

Speaking about the future outlook of the sector, Reddy stated, “The average sale price (ASP) rose by 11 per cent in FY24 on a Y-o-Y basis and is expected to further increase by 5-6 per cent in FY25. This is driven by a change in the product mix with a higher share of luxury units and pricing flexibility arising out of healthy sales and the resultant lower inventory overhang. Given the pandemic-induced desire for larger spaces and changing consumer demand, developers have accordingly realigned their launches. Leverage is estimated to remain comfortable as of March 2025, despite the expected increase in gross debt levels, supported by healthy cash flows. The outlook on the residential real estate sector is stable.”