HomeNewsHousing demand will be unaffected by rising prices, interest rates: Report

Housing demand will be unaffected by rising prices, interest rates: Report

According to CRISIL Research, the momentum in housing demand across India’s top six cities is expected to continue this fiscal and grow 5-10% despite rising property prices, interest rates and a high-base effect. The leverage and credit profiles of real estate developers, which had strengthened on the back of recovery in fiscal 2022, should sustain over the medium term.

According to CRISIL estimates, housing demand rose a solid 33-38% last fiscal, surpassing pre-Covid-19 levels. However, this was on a low base of fiscal 2021, when demand had fallen 20-25%.

Affordability, after improving up to 20 percent between fiscals 2016 and 2021, had started declining from the second half of fiscal 2022. Headwinds now are higher capital values and interest rates, reinstatement of stamp duty, and the high base effect of fiscal 2021, CRISIL Research’s proprietary MAHTI Index indicates.

Inventory levels in majority of the top six cities are at a comfortable 2-4 years as against 3-5.5 years before the pandemic. The correction happened because of fewer launches in the past two years owing to the pandemic and slower sales momentum, the report said.

Although new launches are expected to catch up, healthy demand will keep the inventory levels in check over the medium term largely driven by established developers.

These realtors will continue to gain market share, cornering 24-25% of the spoils by March 2022, compared with 18% at the start of the pandemic. In fiscal 2021, their sales grew 13%, while the industry contracted 20-25%; in fiscal 2022, sales of these developers are estimated to have grown 35-40%, in line with the industry.

Small and mid-sized developers, too, are seeing better days. Their balance sheets have improved, with their debt-to-total assets ratio falling below 50% in fiscal 2022 from 55-60% before the pandemic. However, these players have higher dependence on debt and may need to tie up with established players for new launches to benefit from the latter’s financial flexibility and strong brand.

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