Residential sales growth seen moderating to 10-12% in FY25

Residential sales in India’s top seven cities are expected to witness double digit growth in the current financial year (FY25), despite a sluggish first quarter showing 7 per cent year-on-year (YoY) growth, according to a report of the credit rating agency ICRA Ltd posted on Wednesday.

The total area of homes expected to be sold in the top seven cities could go up by 10-12 per cent to 785-800 million square feet (msf) in FY25 from what was already a decadal high of 714 msf in FY24. Despite the moderation in sales growth rate, the overall sales velocity, collections, and  inventory position are estimated to remain healthy. 

Launches are also expected to rise by 12 per cent YoY to 767 msf in FY25, on an aggregate basis across the top seven cities.

“Residential sales witnessed a healthy growth of 19 per cent YoY in FY24. The 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,” said Anupama Reddy, Co-Group Head and Vice President, Corporate Ratings, ICRA.

The replacement ratio (calculated as launches/sales in the last 12 months) stood at 0.9 and is likely to sustain to around one for FY25. The top seven cities include Mumbai, National Capital Region, Bengaluru, Hyderabad, Pune, Kolkata, Chennai.

Inventory and years-to-sell (YTS, calculated as unsold inventory/sales in last 12 months) stand at a decadal low, as per ICRA. Inventory declined to 687 msf as of June 2024 from 732 msf in March 2023, while YTS remained low at 0.9 as of June. Bengaluru’s YTS went from 2.0 in 2014 to 0.7 in 2024.

ICRA also pointed to an increasing preference towards premium products, increasing the average sale price (ASP) by 11 per cent YoY in FY24 with a further increase by 5-6 per cent expected for FY25.