Key Points

Demand, or volume, is seen rising 5-7 per cent and average prices at 4-6 per cent. With supply expected to continue exceeding demand, inventory levels should inch up this and next fiscal. But strong collections and deleveraged balance sheets of developers will keep their credit profiles healthy.

In the three fiscals through 2025, sales clocked a compound annual growth rate (CAGR) of 26 per cent. Demand clocked 14 per cent CAGR during the same period, with the balance being contributed by the growth in realizations.

Last fiscal, demand was flat because of elevated capital values and delay in launches in some cities due to state elections and changes in property registration rules.

This fiscal and next, demand growth is expected to rebound driven by improving affordability on account of lower interest rates and normalisation of price growth, said the report.

Demand growth will further be supported by sustained demand for premium and luxury houses and smoother launches across key micro markets, as the previous issues causing delays in launches abate.

“The premium and luxury segments in the top seven cities have witnessed a significant surge, with their share of launches increasing from 9 per cent in calendar year 2020 to 37 per cent in 2024,” said Gautam Shahi, Director, Crisil Ratings.

This can be attributed to rising incomes and urbanisation, which have fuelled the desire for larger, more luxurious living spaces. As the trend of premiumisation continues, the premium and luxury segments are expected to account for 38-40 per cent of total launches in calendar years 2025 and 2026,

With the growth in these segments normalising, the average price is anticipated to grow at a steady rate of 4-6% over the medium term, following the double-digit growth seen in the previous two fiscals, v added.

In contrast, the affordable and mid-segments are likely to account for a relatively low share of launches — 10-12 per cent and 19-20 per cent, respectively — in calendar years 2025 and 2026.

This represents a significant decline from their respective shares of 30 per cent and 40 per cent in calendar year 2020, as rising land and raw material costs has rendered these segments less viable for developers.

“As supply is likely to continue outpacing demand this fiscal and the next, the inventory is likely to inch up to 2.9-3.1 years from 2.7-2.9 years in the previous two fiscals,” the report mentioned.

- IANS