Strong luxury and mid-segment demand lifts housing sales to decade-high in Q3

The demand for luxury and mid-segment housing is rising in India's metro cities, driven by the preference for large spaces and home ownership after the Covid pandemic even as the housing sales climbed to a decade-high.

The share of the luxury and mid segments in the overall housing sales increased from 14 per cent and 36 per cent, respectively in FY20 to 16 per cent and 42 per cent, respectively, in the April-December of FY23 in the top seven cities, according to rating agency ICRA.

Post pandemic, ICRA noted that there has been a gradual shift in the overall segment-wise composition with a rise in the share of the luxury and mid segments in overall sales across the top seven cities -- Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), National Capital Region (NCR) and Pune.

Record sales 

The report said housing sales in volume terms grew 11 percent in the third quarter of this fiscal across seven cities on better demand.

"At 149 million square feet (msf), the reported sales in Q3 FY2023 in the top seven cities in India is the highest quarterly sales recorded in over ten years," ICRA said in a statement.

The area sold in the first nine months of FY23 increased to 412 msf against 307 msf in the corresponding period of the previous year.

Anupama Reddy, Vice President and Co-Group Head - Corporate Ratings at ICRA, said, "The value of the area sold in the residential real estate sector is expected to grow by 8-12 per cent in FY23 and a further 14-16 per cent in FY24."

This is based on the sample of the top 12 listed real estate developers. The shift towards larger spaces/ upgrade and preference for home ownership is expected to continue, said the report.

Notwithstanding the rate hikes by the Reserve Bank of India during the current fiscal, the home loan interest rates are still lower than the peak pre-Covid interest rates and the affordability continues to remain healthy, the rating agency said.

"While low inventory overhang and calibrated launches work in favour of developers, the impact of a growth slowdown on the job market and increase in interest rates on affordability pose risks," Reddy said.

Low inventory 

The unsold inventory levels fell to 839 msf as of December 2022 from 923 msf as of December 2021. Consequently, ICRA said the years-to-sell (YTS) for the unsold inventory declined to a decade-low 1.5 years.

Further, the rating agency said the average sale price rose by 10 per cent in Q3 of FY23 on a YoY basis, driven by the partial pass-on of increase in input costs, as well as change in the product mix with a higher share of luxury units.

Builders included in ICRA's sample set were Ashiana Housing, Brigade Enterprises, DLF Ltd, Godrej Properties, Keystone Realtors, Kolte-Patil Developers, Macrotech Developers, Mahindra Lifespaces Developers, Prestige Estate Projects, Puravankara, Sobha Ltd and Sunteck Realty.