CareEdge Ratings has highlighted that rising construction costs and prices could challenge the affordability of housing. The agency emphasized the need to monitor government and developer initiatives aimed at addressing these challenges within the affordable housing sector.
Office Leasing
Despite global economic headwinds, CareEdge Ratings anticipates that office leasing will maintain stability. The sector saw strong growth in 2023 and the first three quarters of 2024. With over 50 million square feet of supply and absorption expected, the sector’s outlook remains positive, with occupancy rates projected to stay above 80%.
Air Travel
In the air travel sector, CareEdge Ratings expects passenger traffic to grow at double the rate of GDP growth for FY25-FY26. The ratings agency also forecasts a capital expenditure of approximately INR 40,000 crore for Indian airports between FY 2025-27. Non-aero revenue is projected to grow by 10-12% in FY25, while air-cargo is expected to see a growth of 9-10% due to the ongoing Red Sea crisis. Additionally, a tariff hike of 1.25x-2.25x for major public-private partnership (PPP) airports is anticipated.
National Highways (NH) and Toll Growth
CareEdge Ratings expects a slight decline of 10% in the pace of National Highway construction in FY25. The bidding intensity for Hybrid Annuity Model (HAM) projects remains high. However, the share of toll projects under the revised Model Concession Agreement (MCA) is expected to increase to 15-20% by FY26, with overall toll growth estimated at 7% in FY25.
Data Centres
The data centre sector is projected to see robust growth, with a stable outlook driven by a Capex outlay of approximately INR 50,000 crore from FY25-27. CareEdge Ratings expects the data centre capacity to double by 2027, with an annual revenue growth rate of 30% from FY25-27. The sector's leverage ratio is forecasted to remain steady at 5x.
Renewable Energy
Sabyasachi Majumdar, Senior Director at CareEdge Ratings, stated that the renewable energy sector is poised for significant growth, with domestic manufacturing and capacity additions expected to accelerate. The wind energy segment is particularly expected to revive through tenders for wind and hybrid projects, driven by growing demand for power during non-solar hours. Meanwhile, thermal generation is projected to see an improved outlook due to strong demand and limited capacity additions.
Hospitality
In the hospitality sector, CareEdge Ratings forecasts a Year-on-Year (Y-o-Y) increase of 8-9% in Revenue per Available Room (RevPAR), reaching INR 5,200-5,400 in FY25. The sector’s total revenue is expected to grow by 8-9% Y-o-Y. Demand is predicted to rise by 8-9%, while supply is expected to increase by only 4-5% over the next few years. India is expected to add about 55,000 branded hotel rooms in the next five years, representing 33% of the current inventory.
Automobile Sector
The automobile sector exhibited mixed trends in H1FY25. The two-wheeler (2W) segment showed strong growth, driven by rural demand, while the passenger vehicle (PV) segment experienced a slowdown, with only a 2% increase in wholesale volumes due to subdued demand for entry-level cars and high dealer inventories. CareEdge Ratings expects continued healthy growth in the 2W segment, while PV growth is expected to remain muted in FY25.
Steel Industry
CareEdge Ratings noted that steel producers faced profitability pressures in H1FY25 due to declining sales realizations, increased imports, and lower exports. India became a net importer of steel during this period. While demand is expected to pick up in the second half of FY25, spreads are likely to remain subdued, with secondary steel producers being more adversely impacted than integrated producers.
Pharmaceuticals
The pharmaceutical sector is expected to see healthy growth, with an anticipated growth rate of 9-10% from FY25 to FY26, reaching around $65 billion. The growth is attributed to increasing demand for complex and specialty drugs, patent expirations, and opportunities in the Contract Development and Manufacturing Organization (CDMO) segment. Operating margins are expected to expand by 50-100 basis points over the next year.
CareEdge Ratings continues to closely monitor these sectors, adjusting forecasts in line with evolving economic conditions and market dynamics.
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