Home / News / India /  Residential realty demand to see 5-10% rise in FY22: Crisil

MUMBAI : Improved affordability and continuing work-from-home will increase demand for residences by an average of 5-10% (in terms of area) year-on-year in India’s top six cities in this financial year, Crisil in a report said.

According to the rating agency, absolute demand will catch up with pre-pandemic levels only after FY23. The demand in the first half of this fiscal will be impacted by the second wave of the pandemic. Healthy recovery is expected in the second half, much like the previous fiscal, and established developers with well-managed balance sheets would grow faster than the industry, consolidate their presence, and sustain their credit profiles.

Affordability has improved by up to 30% in the six cities during the past five years because of low interest rates, moderate price correction and reduction in stamp duty (especially in Maharashtra in fiscal 2021), showed Crisil Research’s Minimum Annual Household Threshold Income, or MAHTI, index.

On the other hand, capital values have bottomed out and are likely to stabilize with a slightly upward bias this fiscal because of rising raw material and construction-labour costs.

“Demand in Bengaluru, Hyderabad, the National Capital Region (NCR) and Kolkata is set to rise 40-45% this fiscal after plunging 25-45% last fiscal, propelled by better affordability and lower base. In contrast, the Mumbai Metropolitan Region (MMR) and Pune will likely see a contraction of 10-20% this fiscal, after a 5-15% growth last fiscal, with end-users concluding transactions to benefit from lower stamp duty," said Isha Chaudhary, director, Crisil Research.

The pandemic has amplified the divergence in the performance of financially prudent and leveraged developers. Established ones with a strong track record of timely delivery increased their market share to 25% in FY2 from 21% in FY20 as they recovered faster in the second half and maintained, or even exceeded, pre-pandemic sales, the rating agency said.

Crisil expects a slowdown in new launches this fiscal, and developers to focus on sale of ready or near-complete properties, leading to a gradual reduction in inventory. Persistent impact of the pandemic on employment generation and incomes and, in turn, on demand for residential real estate, will bear watching.

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