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ICRA Housing sales improve in top metro cities across India

By Rishabh Chamoli | 2023-03-13

According to rating agency ICRA, the housing sales in seven cities grew by about 10 percent in the third quarter of this fiscal year. This is the highest quarterly sales registered in over ten years. The area sold in the first nine months of FY2023 increased to 412 million sq ft against 307 million sq ft in the corresponding period of the previous year.

As per the latest report from ICRA, the housing sales have increased by 11 percent in the third quarter of FY2022 to 23 in seven cities of India, including Bangalore, Chennai, National Capital Region (NCR), Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), and Pune. The growth in sales can be attributed to better demand for residential properties across the country. ICRA stated that the reported sales of 149 million square ft (msf) in Q3 FY2022 to 23 in the top seven cities is the highest quarterly sales recorded in over ten years.

Steady demand results in robust sales volume
The report stated that the residential real estate markets saw strong demand in Q3 of FY2023, with an 11 percent YoY growth in the area sold. Properties sold in the first nine months of FY23 increased YoY to 412 msf against 307 msf. The shift in the segment wise composition has also been noted post pandemic, with a rise in the share of the mid and luxury segments to the sales across the top seven cities.

Rise in the share of luxury and mid segments to overall sales
ICRA noted that the percentage of luxury and mid segments to the sales has increased from 14 percent and 36 percent, respectively, in FY20 to 16 percent and 42 percent in the April December of FY23.

This shift towards more significant spaces/upgrades and preference for home ownership will continue. The report also stated that the value of the area sold in residential real estate is expected to grow by 8 12 percent in FY23 and a further 14 16 percent in FY24, based on the samples sought from the top 12 listed real estate developers.

Affordability remains healthy despite rate hikes by RBI
Despite the repo rate hikes by the Reserve Bank of India (RBI), the home loan interest rates are still lower than the peak pre COVID 19 interest rates, and affordability remains healthy. However, the impact of a growth slowdown on the job market and an increase in interest rates on affordability pose risks, according to Anupama Reddy, Vice President and Co-Group Head Corporate Ratings at ICRA.

The unsold inventory levels dipped to 839 msf as of December 2022 from 923 msf as of December 2021. Consequently, ICRA said the years to sell (YTS) for the unsold inventory declined to a decade low 1.5 years. The average sales rose by 10 percent in Q3 of FY23 on a YoY basis, driven by the partial pass-on of an increase in input costs and a change in the product mix with a higher share of luxury homes.