Is Strong Capital Flow and Consolidation Driving Real Estate Growth in India?
Click to start listening
Synopsis
The real estate sector in India is set for substantial growth, with strong revenue projections driven by effective project execution and improved affordability. A recent report indicates a promising future for developers, signaling a transformative period for the industry. Dive into the details of this optimistic outlook for the Indian real estate market.
Key Takeaways
- 22% CAGR projected for revenue from FY25-FY27.
- EBITDA expected to reach Rs 252 billion.
- Strong cash flow generation expected to support growth.
- Top developers consolidating market share effectively.
- Improved affordability index indicates positive market conditions.
New Delhi, June 26 (NationPress) Supported by robust collections and a delivery pipeline set for the next 2-3 years, Indian real estate firms are projected to achieve a 22 percent CAGR in revenue from FY25 to FY27, amounting to Rs 861 billion, according to a report released on Thursday.
EBITDA is anticipated to exhibit a 26 percent CAGR, reaching Rs 252 billion, while the blended operating margin is expected to rise by 168 basis points to 29 percent during FY25-27E, as per the sector update report by Motilal Oswal Financial Services Ltd.
“With the timely execution of a strong project pipeline, companies will secure substantial collections. Collections are projected to achieve a 36 percent CAGR, totaling Rs 1.5 trillion over FY25-27E,” the report stated.
These strong collections should lead to a healthy operating cash flow (OCF) generation of Rs 600 billion by FY27E, while cumulative OCF is expected to reach Rs 1.4 trillion from FY25-27E.
“With vigorous cash flow generation, developers are directing their focus towards business development to maintain a strong growth trajectory. Furthermore, solid OCF generation allows developers to keep net debt-to-equity (D/E) ratios in check, remaining comfortably below 0.5x,” the report noted.
In the top seven cities, the leading ten developers have experienced significant consolidation within each market, with their cumulative contribution increasing from 22.7 percent to 31.9 percent in launches, while absorption has risen from 19.0 percent to 23.1 percent over FY15-FY25.
“We believe that this consolidation will enable our covered companies to gain market share and continue to grow at a more accelerated pace compared to the broader market,” it added.
The affordability index (EMI-to-income ratio) for all eight major markets monitored by Knight Frank ranges from 20-30 percent, indicating improved affordability and consistent growth in housing sales.
“The Mumbai Metropolitan Region (MMR) is the only area where the affordability index stands at 50 percent; however, it is noteworthy that MMR is becoming increasingly affordable year after year,” the report concluded.
Point of View
It is crucial to recognize the resilience and adaptability of the Indian real estate sector. The reported growth trajectory not only reflects a recovery post-pandemic but also underscores the importance of strategic business development and market consolidation. As we analyze these trends, it is evident that the sector is poised for sustainable growth, aligning with the broader economic recovery in the nation.
NationPress
26/06/2025
Frequently Asked Questions
What is the projected CAGR for Indian real estate revenue?
The projected CAGR for Indian real estate revenue is 22 percent from FY25 to FY27.
How much is the EBITDA expected to reach by FY27?
EBITDA is expected to reach Rs 252 billion by FY27, with a CAGR of 26 percent.
What factors are driving the growth in real estate?
Strong collections, timely project execution, and improved affordability are key factors driving growth.
How has the affordability index changed?
The affordability index for the top eight markets is between 20-30 percent, indicating better affordability.
What is the current status of the Mumbai Metropolitan Region?
MMR has an affordability index of 50 percent but is becoming more affordable year after year.
