Moneycontrol PRO

Listed real estate firms continue to do well, post 25% YoY sales growth in Q1FY22: Kotak Institutional analysis

Larger real estate players are likely to expand their footprint as the ongoing consolidation continues to weed out smaller players from the industry

All-India residential real estate sales across major cities in India increased 56% year-on-year to 75 mn sq. ft in Q1FY22 on the back of a lower base of 48 mn sq. ft due to the first wave of Covid-19.  The impact of the second wave of Covid-19 was visible with sales declining sequentially from 179 mn sq. ft witnessed in Q4FY21, an analysis by Kotak Institutional Equities Research.

Listed real estate companies posted a 25% YoY growth in sales in Q1FY22. Unlike the overall industry, listed players had a respectful sales performance in Q1FY21, the analysis said.

Sales in 4QFY21 stood at their highest ever levels in the past five years at 179 mn sq. ft for sales value of Rs 1.07 tn (+31% YoY), it said.

Geographically, sales momentum remained encouraging in Mumbai, Bengaluru, Hyderabad, Pune and Chennai while the NCR market saw slower growth in Q1FY22.

Sales activity failed to pick up in NCR in Q1FY22, reaching 4.4 mn sq. ft (+10% YoY, -63% qoq) after having reached 12 mn sq. ft in 4QFY21. The sales mix was dominated by Gurugram and Greater Noida contributing 37% and 25% of sales, respectively, of total sales of 4.4 mn sq. ft clocked in NCR while Noida contributed only 22% in Q1FY22.

Close

Launches in NCR remained weak with only 4.5 mn sq. ft of new projects launched in Q1FY22. Greater Noida’s unsold inventory stood at 67.6 mn sq. ft in NCR followed by Gurugram (25%) and Noida (18%) at 47.7 mn sq. ft and 34.4 mn sq. ft, respectively.

Net unsold residential inventory in NCR stood at 189.3 mn sq. ft as of June 2021, declining by 7.2 percent YoY and equivalent to 5.4 years of sales (based on trailing 12 months). Blended realizations in NCR increased 24% YoY to Rs6,730 per sq. ft in Q1FY22, led by 17% YoY increase in Gurugram, 12% YoY increase in Noida and 10% YoY increase in Greater Noida.

In Mumbai Metropolitan Region (MMR), strong sales recovery was witnessed in 2HFY21, MMR saw a decline in Q1FY22 with sales of 13.3 mn sq. ft. Sales suffered due to the dual impact of a second wave of Covid-19 and  removal of temporary reduction in stamp duty. Thane continued to maintain a higher share in overall sales in MMR at 50% while Mumbai and Navi Mumbai contributed 34% and 16% sales, respectively, in Q1FY22.

Launches in MMR remained at 9.2 mn sq. ft in Q1FY22 with Mumbai contributing 39% of the launches in Q1FY22. Realizations in MMR increased by 6% YoY in Q1FY22 to Rs 10,370 per sq. ft due to lower sales contribution from Mumbai in the base quarter even as Thane saw a decline of 4% YoY.

MMR is seeing a sharper decline in inventory among all regions, although outstanding inventory still remains the highest at 242 mn sq. ft as of June 2021 (down from 288 mn sq. ft in June 2020), the analysis said.

Bengaluru saw sales of 7.7 mn sq. ft (+40% YoY, -55% qoq) against launches of only 4.2 mn sq. ft (-15% YoY, -64% qoq ) in Q1FY22. Launch activity in Bengaluru has remained weak over the past year and declined by 38% YoY to 33 mn sq. ft.

Weakening launches on the back of strong sales momentum led to a decline in outstanding inventory to 139 mn sq. ft (-12% YoY) by June 2021 and is equivalent to 2.7 years of sales (based on trailing 12 months). Realizations increased by 4.4% YoY to Rs 6,000 per sq. ft in Q1FY22, it said.

Overall, launch activity across India showed improvement at 52.5 mn sq. ft Q1FY22 against 40 mn sq. ft witnessed in 1QFY21, however, it remained weak compared to average quarterly launches of 88 mn sq. ft in FY2021. Launches in FY2021 stood at 352 mn sq. ft as against 519 mn sq. ft in FY2020.

Outstanding inventory across the country stood reduced to 1.2 bn sq. ft (-12% YoY) as of June 2021, equivalent to 2.3 years of sales (based on trailing 12 months sales).

Average prices across India increased 3% YoY to Rs5,860 per sq. ft in Q1FY22 (from Rs5,700 per sq. ft in 1QFY21).

Property registration data for Mumbai and Maharashtra in August 2021 (till August 27, 2021) stood at 6.3K and 96K, slightly weaker than levels seen in 4QFY21 though still strong, suggesting continued sales momentum, the analysis said.

Consolidation continues to weed out smaller players from the industry

Larger real estate players are likely to expand their footprint as the ongoing consolidation continues to weed out smaller players from the industry. A low interest rate regime leading to improved affordability will continue to fuel sales momentum. The industry’s demand-supply dynamics are well placed against a backdrop of weakening launch activity, it noted.

Recovery in development plays, relative to pure annuity investments, will likely lead to stocks trading at a premium to NAVs due to strong business prospects. Bengaluru-based players are better positioned to capitalize on the growth story in the sector, the analysis said.
Moneycontrol News
first published: Aug 30, 2021 02:51 pm
Sections
ISO 27001 - BSI Assurance Mark