The outlook for residential real estate will be strong in the financial year (FY25), as the domestic residential market performed exceptionally well in FY24, said JM Financial in its estimate.
As per the estimation for FY25, the market will grow by 18 per cent, with 12 per cent coming from an increase in the number of units sold and 6 per cent due to higher prices.
Additionally, it expects that the supply will grow moderately, matching the demand for new purchases throughout the year.
The domestic residential market performed exceptionally well in FY24, reaching its highest-ever absorption rate; pan-India absorption rose by approximately 20.1 per cent YoY (basis area absorbed), while supply increased by about 11.5 per cent YoY, as a result, inventory levels in cities dropped to a record low of 12 months, the report mentioned.
During FY 24, the sector recorded an average YoY price increase of 9.0 per cent, indicating an overall market growth of 29 per cent. This positive trend, according to the report, is also evident in pre-sales for listed companies, which grew 39.5 per cent YoY, indicating that market share gains continue for the listed/Tier 1 developers.
"With historically low inventory levels, increasing disposable income, and limited supply expansion, the residential real estate sector is set to continue its upward trajectory," the report added. "While supply is expected to grow steadily going forward, we expect inventory levels to be maintained at healthy levels on the back of robust absorption, given the buoyant demand scenario. Additionally, while cash flows are anticipated to grow substantially, developers are likely to prioritise business development over deleveraging," JM Financial said in its outlook.
FY24 saw a best-ever year for absorption across residential real estate with pan-India sales crossing a billion square feet mark, as per the report.
Since FY21, pre-sales in the top 7 markets have largely been ahead of new launches, leading to a sharp reduction in inventory levels to 11 months. Among the listed players, Godrej, Prestige, Signature and Brigade delivered very strong growth in FY24, as per the report.
Observing an ushering trend, the report added that real estate companies have started diversifying into new micro markets to reduce dependence on core regions and capture growth opportunities.
With greater preference for branded and high-end products, Tier 1/listed developers are aiming to gain market share from the fragmented/informal segment of the industry, the report added.
Citing the data from Propequity it stated that the industry has seen Tier 1 developers gaining market share from the informal segment. The top 10 publicly listed developers have increased their market share by around 8 percentage points since 2019.
In Tier I cities, the demand for luxury properties has grown significantly since FY22. Post-Covid, there is a growing preference for spacious, well-equipped residences that cater to remote work needs and offer enhanced security features, it added. (ANI)
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