‘Primed For Growth’ Is Old News: Real Estate Now Looking at Double-Digit Growth

It is gaga time for real estate. Sales are peaking, and so are demand and supply. Projections are positive and buyer sentiment is soaring. The market is progressively eyeing new highs. It could hardly get any better for a real estate investor.

Just recently, the Uttar Pradesh government announced its $1 trillion economy roadmap with investments worth Rs. 7.3 lakh crore pledged towards real estate. That real estate is primed for growth is old news now—it's in fact primed for double-digit growth.

That is the synopsis coming out of the latest CRISIL report which says listed residential real-estate developers are likely to hit double-digit growth this fiscal year. The key findings throw up several interesting viewpoints.

Let us parse them in a nutshell.

Large Realtors as a Catalyst

Large realtors are projected to contribute 40-45% of the new launches this fiscal. This means their market share to jump to nearly 24% this fiscal and 25% by fiscal 2024. That is a substantial build-up from less than 14% before the pandemic.

Luxury housing driven by burgeoning work-from-home culture, and increased post-pandemic average incomes will keep large realtors ahead in the hunt.

Inventory Surplus Restored

The supply surplus from the pandemic phase is offset & restored by fewer launches in past few years and robust sales momentum. Though new launches are picking up steam, positive demand will keep the inventory surplus in check.

It is not just inventory surplus but also inventory type that is undergoing change. Luxury homes—priced above Rs 1.5 crore-- now make up 40-45% in value against affordable housing –priced under Rs. 40 lakhs—went down 10-30% as positive sales pushback mounted.

Fresh Launches to Scale Up

The deleveraging that set in during the pandemic-- in addition to equity acquisition through monetization --has eventually strengthened the capital structure for developers.

The ongoing sales momentum adds to that, meaning, there is enough liquidity cover for new launches and land purchases. New opportunities for cooperative development will further scale up fresh launches and maintain expansion.

Demand Surge to Sustain

The Indian economy is strengthening and it will take that momentum into 2023. It will hold appeal to domestic and international investors. The Indian government is egging the real estate industry on with aggressive policy moves.

This includes financial support for house building, tax advantages for developers, and other incentives – the perfect potpourri for FDI to make its way in.

Upward Trajectory

With positive demand-supply dynamics and price surges observed in key input materials, it is expected for residential prices to see an upward movement of 6-10% this fiscal. A supplementary surge of 3-5% is likely in the following fiscal.