Housing on a High Note

Torbit - June 25, 2023 - - 0 |

Residential real estate continues to benefit from strong demand, as pre-sales touched a record high of 241 mn sq. ft (up 16% yoy) in 4QFY23 and 878 mn sq. ft (up 31% yoy) in FY2023. The NCR market, led by Gurugram, saw strong pricing (up 34% yoy), coupled with improved sales volumes (up 37% yoy). The performance of listed real estate players reflected the industry’s strength, with DLF leading the pack, followed by Lodha, Prestige and Godrej Properties.

According to Kotak Institutional Equities report, all-India residential real estate sales across major Indian cities rose 16% yoy and 2% qoq to 241 mn sq. ft in 4QFY23, marking the best-ever quarterly sales in at least 16 years. This was supported by strong demand in the NCR and MMR, with sales of 25 mn sq. ft (up 61% yoy) and 40 mn sq. ft (up 14% yoy), respectively, while Bengaluru at 20.5 mn sq. ft (up 1% yoy) saw a weaker headline performance. Launch activity across India lagged sales at 204 mn sq. ft (down 2% yoy and 4% qoq). This led to outstanding inventory across the country reducing to 1.3 bn sq. ft (down 5% yoy) as of March 2023 and equivalent to 1.5 years of sales (based on trailing 12 months sales) – Bengaluru led the inventory liquidation. Average prices across India increased 16% yoy and 8% qoq to Rs7,356 per sq. ft in 4QFY23, with prices in the NCR rising as much as 48% yoy to Rs11,632/sq. ft, led by Gurugram and Noida. Mumbai also saw strong price action, with a 14% qoq increase.

FY2023 sales were also the best-ever annual sales in the last two decades, with sales of 878 mn sq. ft (up 31% yoy) and realization growth of 11% yoy; sales value rose 46% yoy to Rs6 tn. Launches rose 20% yoy to 805 mn sq. ft, leading to inventory liquidation (down 5% yoy) of 72 mn sq. ft. April 2023 continues to see robust activity, with sales of 70 mn sq. ft (up 2% yoy) and a price increase of 14% yoy to Rs7,234/sq. ft, supporting a 16% yoy increase in sales value to Rs 505 bn – Gurugram continued to lead from the front.

Healthy Performance by Listed Players

The coverage universe witnessed strong sales growth of 45% yoy and 60% qoq to Rs236 bn in 4QFY23, leading to a market share of 13.3% on an all-India basis (sales of Rs1.77 tn, up 35% yoy). Across top-3 metros, the market share for the coverage universe stood at 25% in 4QFY23.  DLF reported the strongest show in FY2023, with pre-sales doubling to Rs150 bn. GPL saw 56% yoy growth in pre-sales to Rs122 bn, while Lodha, Sobha and Brigade saw yoy growth of over 30%. Oberoi saw relatively weak performance, with a 17% yoy decline in sales, while Sunteck missed management guidance by 10%.

Valuations for most residential real estate stocks have risen to 7-11X implied EV/EBITDA on FY2024E pre-sales, at the higher end of the past trading range. This reflects the strong underlying business performance as well as changing investor interest, with the announcement of “rate pause” addressing potential risks to demand previously seen by investors. There is constructive optimism  on the sector owing to strong operational performance by the players.

 Region-wise Performance 

National Capital Region (NCR) The NCR saw the strongest improvement in sales activity during 4QFY23, with sales of 25 mn sq. ft (up 61% yoy and 34% qoq); the same was also visible in strong launch activity during the quarter at 28 mn sq. ft (up 316% yoy and 68% qoq). The sales-mix was dominated by Gurugram (67%), followed by Greater Noida (13%), Ghaziabad (9%) and Noida (8%).

Net unsold residential inventory in the NCR increased a tad sequentially to 167 mn sq. ft as of March 2023 (down 6% yoy, up 2% qoq) and equivalent to 2.3 years of sales (based on trailing 12 months).  Gurgaon has seen a sequential increase in inventory to 54 mn sq. ft (up 15% qoq), led by very strong launch activity. Greater Noida houses 33% of unsold inventory at 56 mn sq. ft in the NCR, followed by Gurugram (32%) at 54 mn sq. ft, and Noida and Ghaziabad (15% each) at 25 mn sq. ft each.

Blended realizations in the NCR increased 42% yoy and 9% qoq to Rs11,208 per sq. ft in 4QFY23, led by a 30% yoy increase in Gurugram and a 38% yoy increase in Noida.

For the year FY2023, the NCR market saw a strong 37% yoy increase in sales to 71 mn sq. ft, and another 34% yoy increase in average pricing to Rs9,907/sq. ft. Launches at 61 mn sq. ft rose 88% yoy, but lagged full-year sales, leading to a 6% yoy decline in inventory levels.

Mumbai Metropolitan Region (MMR). MMR continued to witness robust momentum in residential sales in 4QFY23, with 40 mn sq. ft of residential sales against launches of 31 mn sq. ft.

Unsold residential inventory in the MMR stood at 256 mn sq. ft as of March 2023, declining by 6% yoy and 3% qoq, and equivalent to  less than 2 years of sales (based on trailing 12 months).  Thane and Mumbai continue to house 84% of the unsold inventory in the MMR.

Realizations in the MMR saw a healthy sequential increase to Rs12,270/sq. ft (up 13% yoy and 9% qoq), aided by strong price action in the Mumbai market that saw realizations increase 14% yoy and 14% qoq to Rs21,584/sq. ft.

For the full-year FY2023, the MMR market saw a 34% yoy increase in sales to 150 mn sq. ft, and a 6% yoy increase in average realization to Rs11,472/sq. ft. Launches rose 21% yoy to 133 mn sq. ft, lagging behind sales and leading to a 6% yoy decline in inventory.

Bengaluru. Bengaluru saw relatively modest sales of 20.5 mn sq. ft (up 1% yoy and down 9% qoq), with weak launches of 17.5 mn sq. ft (down 7% yoy, up 5% qoq) in 4QFY23. Residential sales activity in Bengaluru remains weaker than other markets such as the NCR and MMR. Realization rose  8% yoy and 3% qoq to Rs6,736 per sq. ft in 4QFY23. Weak launch activity still facilitated a reduction in the outstanding inventory for Bangalore, with inventory levels at 107 mn sq. ft (down 13% yoy  and 3% qoq) as of March 2023, equivalent to 1.3 years of sales (based on trailing 12 months).

For FY2023, sales in Bengaluru rose 26% yoy to Rs84 mn sq. ft, exceeding launches of 68 mn sq. ft (up 57% yoy). Inventory declined 13% yoy to 107 mn sq. ft. Average realization rose 6% yoy to Rs 6.498/sq. ft.

Hyderabad. Hyderabad saw sales of 35.7 mn sq. ft (up 20% yoy and 2% qoq), aided by launches of 43.5 mn sq. ft (up 16% yoy and 10% qoq) in 4QFY23. Outstanding inventory increased to 203 mn sq. ft as of March 2023 (up 17% yoy) and is equivalent to 1.5 years of sales (based on trailing 12 months). Realizations increased by 9% yoy and 3% qoq during the quarter to Rs7,291 per sq. ft.

Leave a Reply



Tech Intervention Transforming Real Estate

Dileep PG - February 23, 2024


Realty Foreseen 2024

Sanjeev Kathuria - February 11, 2024


Why Organizations Select Hybrid Data Centres

Jaganathan Chelliah - January 27, 2024




    Join our mailing list to keep up to date with breaking news