Residential real estate gains momentum, new markets drive growth: Report

Real estate growth:  Indian residential real estate sector has witnessed a strong surge in recent years, with top 15 listed developers reporting a compound annual growth rate (CAGR) of 43 per cent in pre-sales from financial year (FY) 2021 to FY24, reaching Rs 1.2 trillion, according to Axis Capital report.

Increasing absorption rates and a focus on higher launches across major and emerging markets have propelled this growth in sector.

Between FY 21 and FY 24, developers scaled in ir established market, which induced a large part of growth observed, said report.

About 80 per cent of this growth was attributed to existing markets, marking a 36 per cent CAGR, with demand particularly robust in top seven cities, which saw a 41 per cent growth in value.

"As demand momentum picked up, most of companies initially focused on scaling up in ir existing markets and simultaneously building a pipeline outside of ir home market," report said.

Leading developers, including DLF, Oberoi, and Sunteck, reported higher contributions from new projects within ir core regions of National Capital Region (NCR) and Mumbai Metropolitan Region (MMR). Some companies, such as LODHA and Prestige Estates, have ventured beyond ir traditional strongholds into Pune, Bengaluru, and MMR.

Axis Capital observed that introduction of Real Estate (Regulation and Development) Act (RERA) has also helped developers to expand outside ir home markets, and many have seen successes too.

"Most of Top 15 listed players invested in markets outside ir existing core markets and added an estimated 130 million sq ftin projects worth Rs 1.75 trillion over FY22-24, which is 10x ir FY24 pre-sales contribution from se new markets," report added.

Despite a recent dip in absorption rates due to an uptick in premium and luxury housing options, demand for residential real estate will remain steady, supported by broader choices and stronger positioning of branded developers, report adds.

Absorption rates are expected to stabilise, with supply increases driving growth, report adds. For FY24-26 period, sector is forecasted to achieve a 24 per cent CAGR in pre-sales, it added.

In terms of supply dynamics, developer participation has surged by 29 per cent since calendar year 2020, especially in MMR and Hyderabad. However, regions like NCR and Bengaluru saw slight declines. Record transaction volumes are being recorded across top seven cities, with MMR, Pune, and Hyderabad experiencing absorption rates up to four times ir previous peak levels, while markets like Bengaluru and Chennai are expected to see furr potential as supply constraints ease.

With new supply anticipated in previously supply-restricted areas such as ida in NCR and key zones in Bengaluru and Chennai, report expects growth across sector to remain robust, with potential increases of 5-10 per cent over next two to three years.