Housing demand likely to stay firm despite increase in property prices, interest rates on loans: Crisil
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Crisil Ratings in its latest report has said that demand for housing is expected to stay firm, despite an increase in property prices as wells as the interest rates on loans. It said the housing demand in the top six cities is expected to grow by 5-10 per cent, and the increase will be visible despite a high base.
The agency estimated that housing demand rose by 33-38 per cent in FY22, surpassing pre-Covid-19 levels. It said the high growth was recorded on a low base of FY21, when demand had fallen by up to one-fourth. It also said affordability had started declining from the second half of FY22, after improving up to 20 per cent between fiscals 2016 and 2021 and the second half of FY22.
According to the report, higher capital values, interest rates, reinstatement of stamp duty and the high-base effect were major headwinds for the sector. It expects residential real estate prices to rise 6-10 per cent across the top six cities this fiscal due to a steep rise in material costs and relatively favourable demand-supply dynamics, especially for established developers. It noted that inventory levels in majority of the top six cities are at a comfortable 2-4 years as against 3-5.5 years before the COVID-19 pandemic and the correction happened because of fewer launches in the past two years owing to the pandemic, and slower sales momentum.
