Housing Prices to Rise 5-6%: ICRA

New Delhi, Aug 7 (PTI) Rating agency ICRA has projected a 5-6 per cent growth in average sale price in residential segment because of higher focus on launches of luxury homes by real estate developers.

The rating agency expects the area sold in the top seven cities in India to increase by 10-12 per cent to 785-800 million square feet in 2024-25. These seven cities are Mumbai Metropolitan Region (MMR), Delhi-NCR, Bengaluru, Hyderabad, Pune, Kolkata, and Chennai.

ICRA said in a statement that the overall sales velocity, collections, and inventory position are estimated to remain healthy, despite the moderation in the sales growth rate.

The launches are expected to rise by 12 per cent year-on-year (YoY) to 767 million square feet this fiscal.

Anupama Reddy, Co-Group Head & Vice President – Corporate Ratings, ICRA, said: “With epic sales and low leverage, the dream run continues for residential real estate players. The residential sales witnessed a healthy growth of 19 per cent YoY in 2023-24."

Area sold in the top seven cities in Q1 of this fiscal witnessed moderate growth of 7 per cent YoY due to lower launches, which are deferred to subsequent quarters.

Despite a sluggish first quarter, ICRA said it expects double-digit growth in residential sales in the top seven cities driven by strong end-user demand and healthy albeit moderating affordability.

Reddy said: "The average sale price rose by 11 per cent in FY'2024 on a YoY basis and is expected to further increase by 5-6 per cent in FY2025."

"This is driven by a change in the product mix with a higher share of luxury units and pricing flexibility arising out of healthy sales and the resultant lower inventory overhang," she said, adding that the outlook on the residential real estate sector is stable.