After two years of double-digit price appreciation, India’s residential real estate market is expected to enter a phase of steady, moderate growth. According to Crisil Ratings, housing prices are projected to rise by 4–6% over the medium term, while demand, measured in volume, is likely to increase by 5–7%. Though supply is set to outpace demand slightly—raising inventory levels—developers are expected to maintain healthy financial profiles, backed by strong cash flows and reduced leverage. The market, having matured through a post-pandemic surge, now appears poised for a more sustainable trajectory driven by affordability and easing interest rates.
Post-Pandemic Surge Tapers Into Steady Growth
Following a robust recovery in the wake of the pandemic, India’s residential real estate market is settling into a more stable rhythm. Crisil Ratings, in its latest sectoral analysis, forecasts a deceleration in price growth compared to the extraordinary gains witnessed in recent years.
Over the past three financial years, residential sales value expanded at a compound annual growth rate (CAGR) of 26%, driven by a 14% CAGR in volumes and the remainder attributed to increasing realisations. This momentum, however, is expected to normalize as macroeconomic factors such as affordability and policy changes begin to influence market dynamics more significantly.
Price Growth to Moderate, but Remain Positive
Crisil projects a 4–6% increase in housing prices in the medium term—significantly lower than the double-digit appreciation seen during the recent post-pandemic boom. This moderation is not indicative of a slowdown but rather a recalibration toward a more balanced market.
The forecasted growth in prices reflects a gradual normalization in demand, easing cost pressures, and a steady buyer sentiment supported by improving financing conditions. While price inflation cools, developers are unlikely to face a substantial squeeze, given that margins have been fortified over the previous two fiscal years.
Demand to Rebound, Aided by Easing Financial Conditions
After a plateau in volume growth last fiscal—largely due to elevated property values and administrative disruptions such as election-related delays and changes in state-level registration protocols—demand is poised to pick up again.
Crisil expects a 5–7% growth in residential sales volume this fiscal and the next, supported by improving affordability metrics. A key enabler of this resurgence will be relatively lower interest rates, which enhance buyers’ purchasing power and unlock pent-up demand in both premium and mid-segment housing markets.
Inventory to Rise Slightly Amid Supply-Demand Mismatch
Despite the optimistic outlook on demand, supply is anticipated to outpace absorption in the short term, leading to a modest increase in unsold inventory levels. Developers, riding on improved liquidity and robust balance sheets, are likely to accelerate project launches, particularly in high-growth urban centers.
This imbalance, while temporary, signals a potential softening of pricing pressure in certain micro-markets. However, the overall national trend is expected to remain within the predicted band of moderate appreciation, provided the demand trajectory continues its upward trend.
Developers' Credit Health Remains Strong
One of the key takeaways from Crisil’s analysis of 75 real estate firms—collectively representing around 35% of India’s residential sales—is the robust financial health of developers. Strong sales collections over the past three years have helped developers reduce debt, placing them in a stronger position to weather market fluctuations.
This deleveraging, combined with sustained cash flows from ongoing and completed projects, is expected to preserve their creditworthiness. These sound financials offer developers the flexibility to undertake new projects, absorb moderate cost pressures, and navigate regulatory uncertainties.
Conclusion: A Maturing Market with Controlled Optimism
India’s housing sector appears to be entering a new phase of maturity—characterized by measured growth, improved buyer confidence, and enhanced financial resilience among developers. The days of explosive growth may be behind us, but the foundation now seems stronger and more sustainable.
Moderate price appreciation, rising but manageable inventories, and a rebound in demand all point toward a stable market. Crisil’s outlook reinforces the narrative that the sector is evolving beyond cyclical volatility, supported by structural tailwinds such as urbanization, demographic shifts, and policy reforms.
For investors, developers, and policymakers alike, this signals an opportunity to recalibrate expectations, focus on execution quality, and foster long-term value in India’s dynamic residential real estate landscape.
Comments