Residential real estate sales to grow by 8-10% in FY22-23: CRISIL study

The study included 11 large and listed, and 76 small and mid-sized residential developers; buoyant residential demand has resulted in robust sales growth in the past two fiscals

The residential real estate sector across the top six cities of India — Mumbai, Delhi NCR, Bengaluru, Pune, Kolkata, and Hyderabad — is expected to clock 8-10 per cent sales growth this fiscal year, according to a report by rating agency CRISIL.

Buoyant residential demand across all segments has resulted in robust sales growth in the past two financial years, the report stated.

The study included 11 large and listed, and 76 small- and mid-sized residential developers accounting for 35 per cent of the residential sales in the country.

Aniket Dani, Director, CRISIL Market Intelligence and Analytics said, "Healthy economic growth and offices continuing with a hybrid working model is keeping demand for residential real estate steady this fiscal, especially for bigger and premium residences. This demand is expected to hold firm at eight per cent to 10 per cent despite rise in interest rates and capital values for the aforesaid reasons. The demand momentum is expected to continue on the back of inventory being at comfortable levels of around three years of sales on an average as against four-and-a-half years before the pandemic. Developers, therefore, are on a stronger footing with greater confidence on new launches getting absorbed in line with incremental demand."

 

In fact, sales by the aforementioned 11 large developers rose by 50 per cent on-year last fiscal in value terms, while the area sold increased by 20 per cent, the report said.

These developers can increase their market share by 30 per cent this fiscal from 17 per cent in FY20, if they witness high sales and have easier access to bank finance and capital markets.

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Pranav Shandil, Associate Director, CRISIL Ratings, said, “Credit risk profiles of large developers have benefitted from liquidation of inventory amid healthy sales growth in the past two fiscals. Their leverage has improved substantially with their debt to total assets ratio expected at 20 per cent by March 2024 compared with 45 per cent at the start of the pandemic.”

The credit metrics of small- and mid-sized developers have improved as well, with the debt-to-total assets ratio expected at 45-47 per cent by March 2024 as against 54 per cent before the pandemic.