ICRA Listed Realty Players Report Robust Sales in 9M FY2019 - infrabuddy.com

ICRA Listed Realty Players Report Robust Sales in 9M FY2019

ICRA Listed realty players report robust sales in 9M FY2019 despite sluggish overall demand; depicts sustained consolidation of market share. Record sales achieved in Q3 FY2019, with sales levels during the quarter being the highest recorded over the past twenty quarters.
Going forward, the ability of the developers to tide over prevailing challenges and maintain sales momentum will remain critical for a sustained recovery.

ICRA Listed Realty Players Report Robust Sales in 9M FY2019
ICRA Listed Realty Players Report Robust Sales in 9M FY2019

Although the residential real estate segment continues to go through a prolonged slowdown on the back of high inventory overhang and subdued demand conditions, major listed realty players have continued to record steady improvement in sales volume and value during 9m FY2019, thereby garnering increased market share, in line with ICRA’s expectations. With this continuing robustness in sales, new project launches from these larger developers have also witnessed an increase, although the focus on execution and completion of ongoing projects has simultaneously been maintained.

Commenting on the trend, Ms. Mahi Agarwal, Assistant Vice President and Associate Head at ICRA, said, “The ongoing process of consolidation within the residential real estate segment post the implementation of structural reforms such as RERA and GST remains strong, with considerable market traction being witnessed by large organized players in recent quarters. Notably, the momentum continued into Q3 FY2019, despite the slowdown in NBFC financing, possibly on account of larger developers being better placed, vis-à-vis smaller players, to grapple with the recent structural changes and liquidity issues. Tilting home buyer sentiment towards larger players on the back of increased transparency, proven track record of timely execution and developer’s focus on right-sizing and right-pricing of inventory have been the key drivers of this positive trend.”

The area sold during 9m FY2019 by the companies in ICRA’s sample set , comprising ten large listed entities, stood at a robust 22.4 million square feet (mn sq ft), registering a 50.7% growth over the corresponding period a year ago. In fact, 8.9 mn sq ft of sales were recorded in Q3 FY2019 alone, depicting the highest level of quarterly sales recorded over the past twenty quarters (i.e. – from FY2015 onwards). Correspondingly, the sales value of the area booked also increased to Rs. 14,461 crore in 9m FY2019, as compared to Rs. 10,980 crore over the same period a year ago; registering a growth of 31.7% for the period under consideration. Collections also remained high, standing at Rs. 12,234 crore during 9m FY2019, recording a growth of 14.1% over 9m FY2018, notwithstanding some slow-down relative to H2 FY2019.

ICRA, however, notes that the weighted average price witnessed a de-growth of 12.6% on a Y-o-Y basis during 9m FY2019, standing at Rs. 6,460/sq ft, as against Rs. 7,392/sq ft during 9m FY2018. Market dynamics aside, this correction in prices has been driven by developer focus on keeping average ticket sizes affordable in order to augment demand recovery in the real estate segment. With developers thus realigning strategies to meet market requirements, quarters-to-sell (QTS) have remained better than in previous years, standing at 9-quarters during 9m FY2019, as against 10-quarters in March 2018 and 14-quarters in March 2017. Early indicators of a gradual recovery for large real estate players, therefore, seem to be in place.

In order to capitalize on this plausible recovery, large listed players have increased the pace of project launches, as expected by ICRA. The same stood at a high 22.7 mn sq ft during 9m FY2019, as compared to 10.7 mn sq ft in the corresponding period a year ago. While most large listed entities registered an increase in launches, Godrej Properties Limited was particularly active in the last quarter, launching six new projects/phases over five cities. Consequently, launches in Q3 FY2019 alone stood at 15.7 mn sq ft. Notably though, the pace of execution of ongoing projects was simultaneously maintained, with 29.5 mn sq ft of area being completed during 9m FY2019, as against 23.4 mn sq ft in 9m FY2018. This continued focus on delivery remains important for sustaining cash inflows from pending collections and underpinning demand, given the increasing home buyer preference for completed inventory.

“Going forward, large organized players with established brands and proven execution ability are expected to continue to benefit from the ongoing consolidation in the residential real estate segment. However, headwinds remain in the form of transition to the revised GST structure without availability of input tax credit , uncertainties pertaining to the upcoming general elections, continued funding challenges on the back of the NBFC slow down, and overall weakness in demand. The ability of the developers to tide over these challenges and maintain sales momentum will remain critical for a sustained recovery,” added Ms. Agarwal.

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