Realty price hikes brace for a litmus test
₹7,938 per sq. ft. in the March quarter (Q4FY24), marking a multi-year high with an 8% year-on-year and 4% sequential increase, according to data from PropEquity and Kotak Institutional Equities.
Realty stocks have been rewarded for their resilience in pre-sales despite an elevated interest rate environment. Over the past year, the Nifty Realty index has surged 122%, significantly outperforming the Nifty50 benchmark which rose 25%. However, FY25, with a flood of new project launches and supply, may challenge this optimism.
Listed companies have set ambitious pre-sales targets for FY25, despite a high base of FY24. For example, Macrotech Developers Ltd (Lodha) is aiming for a 20% compound annual growth rate in pre-sales. Similarly, Godrej Properties Ltd and Prestige Estates and Projects Ltd are targeting 20% and 25% year-on-year growth in pre-sales, respectively.
These firms anticipate that new launches will drive a substantial portion of their pre-sales in FY25. However, cracks are emerging. The residential rental market is beginning to feel the strain of oversupply.
Data from Anarock Property Consultants, released on Tuesday, indicated that rental prices in key micro markets across major cities rose a modest 2-4% sequentially in the second quarter of 2024, compared to a 4-9% increase in the first quarter. The top seven cities are set to deliver approximately 531,000 new units in 2024, compared to 435,000 units in 2023, representing a 22% annual increase in supply if delivery schedules remain on track, Anarock said. This influx could exert further pressure on rental rates, diminishing the investment appeal of real estate.
Read more on livemint.com
