India’s residential real estate market has experienced a slowdown in sales volumes during the first nine months of FY25, with tier-1 developers reporting a 3% year-on-year decline in sales area. The third quarter of FY25 saw an even sharper drop, with sales volumes down by 18% compared to the same period in FY24. Despite this decline in sales, property value collections have increased by 9% year-on-year, driven primarily by higher property prices.
According to India Ratings and Research (Ind-Ra), the downturn in pre-sales is largely attributed to delays in approvals and specific one-off events, particularly in Bengaluru. Additionally, developers had strong sales in Q4FY24, which may be hard to replicate in Q4FY25 due to the base effect and moderating demand. As a result, Ind-Ra expects overall pre-sales value growth to slow down for FY25.
Mahaveer Jain, Director and Head of Real Estate at Ind-Ra, noted that despite slower bookings, the overall launch-to-pre-sales ratio remains above the historical median of 0.85 times, indicating that unsold inventory is not excessive. This suggests that the slowdown in sales will not lead to an oversupply in the market.
The pre-sales value for tier-1 developers stagnated in Q3FY25 on a year-on-year basis. Among the 11 top developers, five reported a decline in pre-sales, many of which are based in Bengaluru. Godrej Properties, the largest developer among Ind-Ra’s rated peers, reported pre-sales of Rs 54 billion in Q3FY25, while Macrotech Developers reported Rs 45 billion. Developers in the Mumbai Metropolitan Region, such as Sunteck Realty Limited, saw positive pre-sales growth, with Sunteck posting a 40% year-on-year increase.
However, Bengaluru-focused developers like Sobha Limited and Puravankara Limited reported significant declines in pre-sales, with Sobha seeing a 29% year-on-year drop. Other developers, including Mahindra Lifespace Developers and Arvind Smartspaces, also experienced notable declines in pre-sales of 25% and 20%, respectively.
Despite the slower pre-sales, collections increased by 26% year-on-year in Q3FY25, with Macrotech leading the pack with a 64% increase. Godrej Properties followed with a 27% rise in collections. The overall collection-to-pre-sales ratio improved to 75% in 9MFY25 from 64% in the previous year, indicating enhanced project execution efficiency.
The peer-set’s total collections for FY25 have risen significantly, amounting to Rs 498 billion, up by 28% year-on-year. Mahindra reported the highest collection-to-pre-sales ratio at 110%, followed by Arvind at 102%, thanks to their efficient project execution despite slower pre-sales.
Debt levels for developers also saw an increase, with gross debt rising from Rs 471 billion in March 2024 to Rs 511 billion by September 2024. This rise in debt levels is attributed to delayed project launches, though strong collections have somewhat mitigated the impact. Ind-Ra projects that debt levels will continue to increase slightly as launches pick up, despite the ongoing slowdown in luxury market demand.
Overall, while the residential real estate market in India faces challenges in terms of sales volumes, developers’ ability to maintain strong collections signals continued resilience in the sector.
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