ICRA forecasts a 10-12% increase in residential sales across the top seven cities for the fiscal year 2025. This anticipated growth is projected to elevate the total area sold to between 785 and 800 million square feet (msf), following a strong performance in FY2024.
The report highlights that, despite a slight moderation in the growth rate, key metrics such as sales velocity, collections, and inventory levels are expected to remain robust. The projected rise in new launches is set to reach 767 msf, marking a 12% year-on-year increase. This uptick is attributed to historically low inventory levels, a comfortable years-to-sell (YTS) ratio, and sustained demand.
As of June 2024, inventory levels have decreased to 687 msf from 732 msf in March 2023. The YTS ratio remains low at 0.9 times, reflecting healthy sales and strategically managed launches. This decline in unsold inventory, combined with a steady flow of new projects, supports a positive outlook for the market. A spokesperson from ICRA’s Corporate Ratings noted that residential real estate has continued its strong performance, with a remarkable 19% growth in sales in FY2024.
Despite persistent challenges such as elevated home loan interest rates and increasing property prices, sales have consistently hit new highs, with only minor fluctuations in the traditionally slower first quarters. The growth in residential sales is expected to continue at a double-digit pace, driven by strong end-user demand and manageable affordability. The replacement ratio, which measures the volume of new launches relative to sales, stands at 0.9 times and is anticipated to stabilise around 1 time for FY2025.
Looking ahead, ICRA anticipates a 6-7% increase in gross debt for FY2025, driven by a rise in construction finance requirements. However, leverage, as measured by the ratio of gross debt to cash flow from operations (CFO), is expected to remain stable at 1.55-1.60 times by March 2025, a slight improvement from 1.63 times in March 2024. The average sale price (ASP) of residential units, which increased by 11% in FY2024, is projected to rise further by 5-6% in FY2025. This increase is attributed to a shift towards luxury units and pricing flexibility, driven by strong sales performance and reduced inventory overhang.
