MUMBAI: The residential sales across India’s top seven cities are expected to witness double digit growth in 2024-25. The area sold in Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Bengaluru, Hyderabad, Pune, Kolkata, Chennai is likely to increase 10-12% to 785-800 million sq ft in the current financial year, on a high base of 2023-24, said ratings agency ICRA.Despite the moderation in the sales growth rate, the overall sales velocity, collections, and inventory position are estimated to remain healthy in 2024-25.The launches are expected to rise 12% on-year to 767 million sq ft in the current financial year, on an aggregate basis across the top seven cities, supported by decadal low inventory, comfortable years-to-sell (YTS, calculated as unsold inventory/sales in last 12 months) and healthy demand.The inventory declined to 687 million sq ft as of June from 732 million sq ft as of March 2023 and the YTS remained low at 0.9 time as of June, backed by healthy sales and calibrated launches.“With epic sales and low leverage, the dream run continues for residential real estate players. The residential sales witnessed a healthy growth of 19% on-year in FY2024. The sales consistently reached new peaks in each successive quarter over the past eight quarters (except Q1 FY2024 and Q1 FY2025, given that the first quarters are traditionally laggards) despite elevated home loan interest rates and rising property prices,” said Anupama Reddy, Co-Group Head & Vice President– Corporate Ratings, ICRA.According to her, area sales in the top seven cities in Q1 FY2025 witnessed moderate growth of 7% YoY due to lower launches, which are deferred to subsequent quarters.Despite a sluggish first quarter, ICRA expects double digit growth in residential sales in the top seven cities driven by strong end-user demand and healthy albeit moderating affordability. The replacement ratio (calculated as launches/sales in the last 12 months) stood at 0.9 times and is likely to sustain around 1 time for FY2025.While the gross debt of ICRA’s sample set of developers is expected to increase by 6-7% in FY2025, for new business development, in addition to the increase in construction finance debt, due to a ramp-up in project execution; the leverage measured by the ratio of gross debt to cash flow from operations (CFO) is likely to remain comfortable in the range of 1.55-1.60 times as of March 2025 compared to 1.63 times as of March 2024 due to an increase in the CFO.ICRA’s sample set includes Sobha, Ashiana Housing, Puravankara, DLF, Brigade Enterprises, Keystone Realtors, Prestige Estate Projects, Mahindra Lifespace Developers, Godrej Properties and Macrotech Developers.“The average sale price (ASP) rose by 11% in FY2024 on a YoY basis and is expected to further increase by 5-6% in FY2025. This is driven by a change in the product mix with a higher share of luxury units and pricing flexibility arising out of healthy sales and the resultant lower inventory overhang,” Reddy said.According to her, given the pandemic-induced desire for larger spaces and changing consumer demand, the developers have accordingly realigned their launches. Leverage is estimated to remain comfortable as of March 2025 despite the expected increase in gross debt levels, supported by healthy cash flows. The outlook on the residential real estate sector is Stable.
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