ICRA Forecasts Stable Outlook for FY 2024-25 Residential Real Estate

On August 7, ICRA Limited forecasted a stable outlook for the residential real estate market in FY 2024-25.

ICRA expects strong growth in housing sales across major cities like Hyderabad, Mumbai, Bengaluru, Delhi, Chennai and Pune.

ICRApredicts that the amount of property available for sale will increase by 12-14% to 785-800 million square feet in FY25. This is due to strong demand from buyers and slightly improved affordability.

Home prices are likely to rise by 5-6% this year, which is slower compared to the 11% increase last year. This slowdown is because of more luxury properties coming onto the market and better pricing strategies, according to Anupama Reddy from ICRA.

The agency also notes that Tier II cities are seeing increased demand for real estate, with trends similar to major cities.

Many big developers are looking at these smaller cities for new opportunities.

ICRA expects property launches to grow by 12% to 767 million square feet in top cities, thanks to low inventory and high demand.

By June 2024, unsold inventory had dropped to 687 million square feet, with a low years-to-sell (YTS) rate of 0.9 times.

Cash flow from operations is expected to improve by 9-11%, while debt is projected to increase by 6-7% to fund new land purchases. Despite this, debt levels should remain manageable at 1.55 - 1.60 times.

Collections are forecasted to grow by 19-21% due to more sales and higher prices.

Demand for rental properties is likely to stay strong because there are fewer ready-to-move-in homes.

Even though rental yields have gone up since the pandemic, ready-to-move-in units are still limited, according to Rajeshwar Burla from ICRA.

For distressed projects, the SWAMIH Fund has helped complete about 10-12% of stalled projects.

The fund, originally set at Rs 25,000 crore, has raised nearly Rs 15,000 crore so far to support these projects.