Housing Prices Are Poised To Rise By 5% With An 8-10% Appreciation Rate In Fy24

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India Ratings and Research (Ind-Ra), a leading rating agency, has revised its outlook on the residential real estate sector in India from "improving" to "neutral" for the financial year 2023-24 (FY24). The agency has cited the upward trajectory of the sector in the current financial year, which saw a sales growth of 15% year-on-year for the top eight real-estate clusters, despite challenges such as higher input costs, increasing mortgage rates, and domestic and global recession.

Despite recessionary and inflationary pressures that may impact near-term demand slightly, Ind-Ra expects the market to absorb the pressure and for demand to eventually pick up. Overall, Ind-Ra expects the sales momentum to continue, with housing sales predicted to increase by 9% year-on-year, supported by steady and healthy demand.

Ind-Ra also noted that property prices have risen by 8-10% year-on-year in FY23 and may increase further by 5% year-on-year in FY24. However, it pointed out that construction costs have also risen by 8-10% year-on-year in FY23, causing the blended costs of developers to go up by 5-6% year-on-year.

To handle macroeconomic concerns, developers may not hike prices over the next six-to-seven months and might wait for demand dynamics to play out, according to Ind-Ra. The agency also stated that affordability had been a prime driver for housing sales in FY22 but inflation compelled developers to increase selling prices. A series of repo rate hikes of 250 basis points since May 2022 has also challenged demand dynamics in the affordable segment in FY23, causing mid and premium-segment buyers to defer their purchases.

Ind-Ra expects tier 1 players, which are those with positive brand equity, a large scale of operations, high execution capabilities, strong refinancing abilities, and healthy balance sheets, to record a strong operating performance in FY24 due to their increasing market share. However, some tier 2 and marginal players would continue to struggle with poor sales, collections, and liquidity, according to the agency.

Source: www.timesproperty.com

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