ICRA Report: FY23 Real Estate Outlook Revised to Stable


Ratings and research firm ICRA has revised the outlook for the residential real estate outlook from stable to negative for the current fiscal year 2022-23, supported by good sales traction and a decline in excess inventory.

Good sales momentum is expected to continue, with sales in the seven major cities expected to grow 3% in FY23 from a strong FY22 base. New launches are expected to reach a six-year high of 400 million square feet during the year, showing an improvement over the previous two years which were affected by the Covid-19 pandemic, the company said in a statement.

Growing preference for home ownership, improved affordability, lowest interest rate on home loans ever, among other factors will drive the growth of the sector. Larger, reputable builders with better delivery histories will continue to gain market share.

ICRA Vice President Mathew Kurian said, “The strong recovery in demand following Covid has improved pricing flexibility, particularly in completed projects. Also in FY23, prices are expected to be increased, depending on the traction of project-specific sales, to offset higher construction costs seen in recent quarters.

Healthy demand prospects and pricing flexibility in completed projects can help developers maintain profit margins. Moreover, even with an increase in interest rates on mortgages of 50 to 75 basis points from current levels, demand should remain firm.

New launches are expected to be accelerated significantly, supported by reduced unsold inventory levels and stable demand. “We expect launches to be 21% higher than the estimated 330 million square foot launches in FY22.”

Despite the expected growth in launches, the inventory position should remain comfortable during the year, mainly thanks to stable sales. Thanks to the comfortable inventory and sales position, the number of years to sell should trend towards around two years, compared to 2.6 years at the end of FY21.

However, the ability of developers to raise prices without negatively affecting sales amid prolonged increases in commodity prices, and the extent of new launches will be key metrics for the industry, Kurian said.


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