Housing prices in India expected to moderate 5% in 2024-25: Report

New Delhi: India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the residential real estate sector for the financial year 2024-25.

Absorption in residential real estate and prices are likely to be supported by affordability and stability of interest rates, the rating agency said.

However, given the high base of the just-concluded financial year 2023-24, the growth rates are likely to taper down.

The residential real estate market registered a strong performance in the first three quarters of 2023-24 where the sales growth exceeded 25 per cent year-on-year for the top eight real estate clusters, despite price increases and sticky interest rates.

With most regions witnessing a surge in prices, Ind-Ra expects the pre-sales growth to moderate to 8 per cent to 10 per cent year-on-year in the current financial year.

"Inventory levels have also risen over FY24 in the premium and luxury segment, as launches increased encouraged by the sharp rise in sales and realisations," said Mahaveer Shankarlal Jain, Director, Corporate Ratings, Ind-Ra.

Further, Ind-Ra expects the prices to have been higher 22 per cent year-on-year at end-2023-24 and would be subdued at around 5 per cent for 2024-25, due to the base effect and large amount of new launches planned.

Ind-Ra expects the mid-income and upper mid-income segments, which emerged as the leading consumer segments in 2023-24, to continue to witness a strong buyer interest.
While the premium and luxury segments witnessed sharp demand growth in 2023-24, Ind-Ra expects them to cool down due to the high base as the unsold inventory levels remain elevated and are the highest over the past five years.

Tier II and III Cities to Report Significant Growth:
Renewed government focus on developing infrastructure and improving connectivity across new cities, with mega projects such as highways, airports, metros, and digitization, is likely to stimulate the development of Tier II and III cities and generate substantial growth.

While the relatively new markets of Thiruvananthapuram, Guwahati, Rajkot, and Ranchi market are witnessing exponential growth in housing, Outer Mumbai, Surat, Vadodara, Jaipur, Nashik, Chandigarh, and Bhopal forming over 60 per cent of the market in terms of the units sold, grew at a CAGR by 14 per cent during 2021-2023.