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India Ratings and Research (Ind-Ra) forecasts stability in the residential real estate market for FY25, focusing on affordability. Despite price increases, the market is expected to grow steadily, although at a slower pace compared to previous years. Stable interest rates will support affordability and spur home-buying activity. While sales growth is projected to moderate to 8%-10% year-on-year, demand for mid-income and upper mid-income housing segments remains strong. Price hikes are expected to slow to around 5% year-on-year, maintaining affordability. However, high unsold inventory levels in premium segments pose challenges. Overall, FY25 presents a cautiously optimistic outlook for the residential real estate market.
India Ratings and Research (Ind-Ra) has released a forecast for the residential real estate market in FY25 (Financial Year 2024-2025), predicting a period of stability with a focus on affordability. Advertisement
The report anticipates a stable year for the market, with continued growth despite price increases. This growth is likely to be lower compared to recent years. Stable interest rates are expected to play a key role in supporting affordability and encouraging home-buying activity.
While residential sales in the top eight Indian cities witnessed significant growth (25% year-on-year) in the first nine months of FY24, this growth is expected to moderate to a range of 8% to 10% year-on-year in FY25. This is partly due to a rise in unsold inventory levels, particularly in the premium and luxury segments (which saw a surge in new launches driven by strong demand earlier). Inventory levels in these segments are currently the highest in the past five years.
Ind-Ra expects continued strong demand for mid-income (typically between INR 40 Lakh and INR 80 Lakh) and upper mid-income housing segments (typically above INR 80 Lakh). These segments are likely to benefit from affordability considerations as prices in the premium and luxury segments are expected to remain high.
The report highlights that real estate prices have already seen a significant increase in recent times. With a base of nearly 14% year-on-year growth in FY23 and an estimated 22% year-on-year growth at the end of FY24, Ind-Ra expects price increases to be more subdued in FY25, hovering around 5% year-on-year. This moderation in price hikes is expected to help maintain affordability and support buyer interest.
Despite a positive outlook, affordability remains a key concern. With prices expected to continue rising, even at a slower pace, some potential buyers may postpone their purchase decisions. Additionally, the high unsold inventory in the premium and luxury segments (currently the highest in five years) could create challenges for those developers.
Overall, the report suggests a cautious but optimistic outlook for the Indian residential real estate market in FY25. While growth is expected to moderate, affordability and stable interest rates are likely to support continued buyer activity, particularly in the mid-income and upper mid-income segments.
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