Festival season is here and builders are licking their lips
With the gradual reopening of the economy, investor sentiment towards the ailing real estate sector is slowly turning around. That, coupled with cheaper home loans and moderated property prices, is expected to revive the demand for residential units. So, listed firms have restarted launching projects.
“Heading into the festive season in H2FY22, listed developers have lined up a number of launches across tier-1 cities," said analysts at ICICI Securities Ltd.
For instance, Mumbai-based Sunteck Realty Ltd launched its second project, Sunteck Forest World at Vasind in Thane district, on 4 September. Larger competitor Godrej Properties Ltd may launch four-five projects in Q2, two in the national capital region and one each in Bengaluru and Pune. In FY22, the firm has around 21 launches lined up, spread over 13.3 million square feet; this excludes its Bandra/Worli projects in Mumbai.
Oberoi Realty Ltd is also targeting launches in H2 across Thane, Borivali, Goregaon and other ongoing projects as curbs are further eased. Analysts say that while the exact timing and quantum of launches is awaited, the company is expected to clock at least ₹2,500 crore of sales bookings in FY22.
The confidence of robust demand stems from the recently published property registration data. According to analysts at IIFL Securities Ltd, August property registration data for Mumbai and Maharashtra indicate a complete recovery from the second covid wave impact on industry volumes.
“The month of August witnessed property registration of 6,784 units (including primary and secondary sales) for Mumbai city, around 16% higher than 5,873 units registered in August 2019 (implying a 2-year CAGR of 7.5%) and 2.5 times of August 2020 sales of 2,642 units. August 2021 was the first month reflecting the sales/registrations post restoration of stamp duty back to 5%," said the IIFL report on 6 September. CAGR is short for compounded annual growth rate. Further, listed developers are guiding for a 20-25% CAGR in sales value over the next three years, much higher than the last three/five-year CAGR of 9%/5%, respectively, the report added.
In the past one year, the Nifty Realty Index has rallied 97%. Analysts say the gains are largely due to consolidation picking up meaningful pace post-covid. Meanwhile, improving property demand is expected to lead to faster exhaustion of unsold completed inventory and consequently rub off on realty prices.
It should be noted that over the last few years, residential real estate prices in key cities have been largely stagnant. Analysts say that while property sales may eventually pick up pace, the rise in prices would be in single digits and gradual, at best.