India’s resident real estate sector is poised for an upcycle, primarily buoyed by the improved affordability, said Motilal Oswal Financial Services Limited.
As per MOFSL, decadal low interest rate regime and stagnant prices over the last seven years have driven the affordability quotient.
“The ongoing industry consolidation led by concentration of capital, 400-600 bp advantage in cost of funding for large developers and buyers’ trust on organised developers will further escalate growth for large listed developers,” said the brokerage house.
Besides, it said that inventory across most of the cities is at a manageable level given the industry wide launch discipline that has helped in absorbing cost pressures.
“Sustained strong demand and gradual price hikes augur well for the industry in increasing the overall profit pool, where all the organised players stand to benefit,” it said.
According to MOFSL’s Real Estate Investment Metric (REIM) framework, players exposed to Bengaluru and Pune markets will outperform both in volume and value terms, while the Mumbai-based ones will benefit from the long-term, pent-up demand.
In addition, the continued inflation in commodity prices as well as sharp rise in interest rates and disruptive price hikes may hamper affordability.