MUMBAI: Lower interest rates and premiumisation will help realtors post healthy double-digit growth in home sales this fiscal and the next, as demand stabilises after three years of post-pandemic recovery. This is expected to lead to overall home sales rising by 10–12% in both fiscals, according to a report.
With supply anticipated to continue exceeding demand, inventory levels are expected to inch up during this fiscal and the next. However, strong collections and deleveraged balance sheets of developers will help maintain healthy credit profiles.
In a report based on the analysis of 75 realtors primarily engaged in residential development and accounting for around 35% of residential sales Crisil Ratings stated on Tuesday that in the three fiscals through 2025, sales recorded a compound annual growth rate of 26%, while demand grew by 14% annually. The remaining growth came from an increase in realisations. Based on these trends, demand is expected to grow by 5–7%, with prices rising by 4–6%.
In the last fiscal, demand remained flat due to elevated capital values and delays in launches in key cities, caused by elections and changes in property registration rules.
This fiscal and the next, demand growth is expected to rebound, driven by improved affordability owing to lower interest rates and the normalisation of price growth. Demand will also be supported by sustained interest in premium and luxury housing, as well as smoother project launches across key micro-markets, with previous bottlenecks now easing.
According to Gautam Shahi, a director at Crisil, the premium and luxury segments in the top seven cities have seen a significant surge, with their share of new launches rising from 9% in 2020 to 37% in 2024. This growth has been fuelled by rising incomes and urbanisation, which have increased demand for larger and more luxurious living spaces.
As the premiumisation trend continues, the premium and luxury segments are expected to account for 38–40% of total launches in 2025 and 2026. With growth in these segments normalising, average prices are projected to rise at a steady pace of 4–6% over the medium term, following double-digit growth in the past two fiscals.
In contrast, the affordable and mid-range segments are likely to see a decline in their share of launches, dropping to 10–12% and 19–20% respectively in 2025 and 2026. This marks a significant fall from their respective shares of 30% and 40% in 2020, as rising land and raw material costs have made these segments less viable for developers.
In anticipation of robust demand, developers have ramped up project launches over the past three years, resulting in overall supply outpacing demand. As this trend continues through the current and next fiscal, inventory levels are expected to rise slightly to 2.9–3.1 years, compared to 2.7–2.9 years in the preceding two fiscals.