India’s housing market is showing signs of slowing down, with some warning signals emerging. According to data from Propequity shared by Antique Stock Broking, property sales in the top 10 cities dropped by 8% in the first five months of this financial year (FY25) compared to the same period last year. While new project launches have remained the same, unsold properties are piling up, raising concerns about the sector’s growth.
Several issues are behind this slowdown. Delays in approvals, especially because of election-related disruptions, have slowed down new project launches. Uncertainty around changes to capital gains tax, announced in the Union Budget, also affected sales in July. As a result, realty stocks have lost momentum. After hitting a high in June, the Nifty Realty Index has since fallen by around 4.5%.
The slow pace of new projects is expected to hurt the sales growth targets of real estate companies, which range from 15% to 35%. Companies with fewer ready-to-sell homes may feel the impact more.
IIFL Securities reported that only 16% of planned launches for FY25 happened in the first quarter (April to June). The second quarter (July to September) is expected to be similar, which could further impact the sales of big players like DLF Ltd and Oberoi Realty Ltd. Price increases in the National Capital Region and Bengaluru may also slow down.
As stocks of major real estate companies drop from recent highs, investors are worried about demand and supply issues. However, more project launches are expected in the second half of FY25. These include DLF’s Goa Villa project and Oberoi Realty’s Thane project, among others.
Additionally, a possible interest rate cut by the Reserve Bank of India could make home loans cheaper, giving a boost to the affordable housing sector, where sales have been sluggish.
Despite the slow start, there’s hope that the market will pick up. Eleven realty companies tracked by Antique have reported sales of ₹27,800 crore in Q1FY25. To reach their full-year goals, they need an additional ₹97,600 crore in sales, which will depend on upcoming projects worth ₹1.52 trillion and existing inventory worth ₹1.47 trillion.
In Bengaluru, companies like Sobha Ltd, Brigade Enterprises Ltd, and Prestige Estates are facing delays in getting approvals, which could increase costs. State elections in Maharashtra and Haryana later this year may also slow down real estate approvals in key areas like Mumbai and Pune.
Even with recent dips, the Nifty Realty Index is up 38% in 2024, outperforming the Nifty50. Consolidation in the sector has helped listed developers boost sales, and strong cash flows have allowed them to reduce debt. However, with high sales targets from last year, there are concerns that it may be tough for real estate companies to keep delivering positive results.
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