Growth in housing prices to moderate at 3-4% next fiscal: India Ratings

Housing prices are likely to rise 3-4% next fiscal on high base effect and better supply, according to India Ratings and Research (Ind-Ra).

The rating agency expects the housing price rise to taper in the 2025-26 financial year.

Ind-Ra expects property prices to increase 5-6% year-on-year (YoY) in the 2024-25 fiscal, then moderate to 3-4% YoY for 2025-26, due to base effects and new launches.

Prices surged 21% YoY in 2023-24 with old stock cleared and existing inventory largely liquidated, the agency said.

Ind-Ra has maintained a neutral outlook for the residential real estate sector for the next fiscal.

"Growth in bookings is likely to reduce significantly due to the high base, high prices and a likely slowdown in the luxury segment," it said.

The residential real estate market is expected to register a strong performance in 2024-25, where the sales growth will be around 17% YoY in terms of area sold (square feet of area sold) and around 15% in terms of units sold for the top eight real estate clusters. This growth will be largely driven by the premium and luxury segment sales.

"FY26 is likely to see continued positive growth in bookings, although at a slower pace due to the base effect and moderation in affordability. Among the top eight cities, the National Capital Region, Bengaluru, and the Mumbai Metropolitan Region are likely to remain relatively resilient in bookings, except for the luxury segment," said Mahaveer Shankarlal Jain, Director, Corporate Ratings, Ind-Ra.

Developers might continue to experience positive growth in collections and operating cash flows, leading to a sustained strong balance sheet, Jain added.