India Realty Sales Growth to Cool to 4-6% in FY27

REAL-ESTATE
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AuthorAnanya Iyer|Published at:
India Realty Sales Growth to Cool to 4-6% in FY27
Overview

India's residential real estate market is shifting gears, with sales value growth expected to slow to 4-6% in fiscal 2027. This follows a rapid surge of 26% annually between fiscal years 2022 and 2025. Higher prices and approval challenges are curbing demand, leading to rising inventory. However, developers' finances stay strong thanks to steady collections and solid cash flow.

India's residential property market, which saw explosive growth after the pandemic, is now heading for a slowdown. Analysts at Crisil Ratings project sales value growth to ease to 4-6% in fiscal 2027. This marks a sharp contrast to the 26% average annual growth recorded from fiscal 2022 to fiscal 2025. Growth had already slowed to an estimated 5-7% in fiscal 2026.

Demand and Price Headwinds

Several factors are fueling this slowdown. High property prices have kept volume demand flat, while delays in obtaining approvals in major cities are postponing new project launches. For fiscal 2027, average selling price growth is predicted to slow to 3-5%, a considerable drop from recent sharp increases. Buyer sentiment is expected to be dampened further, with demand growth projected at a flat 0-2%.

Rising Inventory and Luxury Demand

As a result, unsold housing inventory is expected to rise to 3.2-3.4 years in fiscal 2027, up from under three years previously. Resolving approval bottlenecks, especially in cities like Bengaluru, will be crucial. Meanwhile, the premium and luxury housing markets are proving resilient. These segments are forecast to make up 38-40% of all new launches in fiscal 2027, a significant jump from just 12% in fiscal 2022, offering developers higher revenue and profit margins.

Developer Finances Stay Strong

Even with slower sales growth, developers' financial health is holding up well, largely due to consistent cash collections. These collections have kept pace with construction, leading to strong cash flow generation. This steady income has allowed developers to reduce their reliance on external debt. Crisil forecasts cash flow from operations (CFO) to increase by 15-17% in fiscal 2027, driven by a projected 22-24% rise in collections.

Potential Risks Ahead

Developer creditworthiness is projected to stay strong, with the debt-to-cash flow ratio expected between 1.1-1.3 times in fiscal 2027. However, risks remain. A sharper-than-expected drop in demand against a backdrop of high launches could lead to significant inventory buildup. Additionally, global geopolitical issues might increase inflation, further affecting buyer confidence.

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