Listed Players Beat Slowdown, See INR 228 Bn Housing Sales Value in FY19

• Approx. 44 mn sq. ft. residential space sold by top 9 listed players in FY 19 against just 17 mn sq. ft. in FY 17, records more than two-folds jump since DeMo
• Peak year (2014-15) housing sales by these players touched 27 mn sq. ft.; growth of 63% in FY 19
• Total listed players’ new housing supply approx. 61 mn sq. ft. in FY 19, more than double of FY 17
• Apr-Jun quarter of FY 20 alone recorded housing sales of 17.5 mn sq. ft. by these top listed players
• Residential sales value of these players in FY 19 was approx. INR 228 bn

The top 9 real estate developers listed at the stock exchange have beaten the housing sector’s downturn blues. Their FY 19 data reveals that they not only successfully weathered the slowdown period of FY 2016-17 with a 159% jump in housing sales but also surpassed the market's peak years of FY 2014-15 by 63%. The total sales value achieved by these players in FY 19 was approx. INR 228 bn.

The top listed developers considered for analysing trends include DLF Ltd., Sobha Ltd., Puravankara Ltd., Prestige Estates, Brigade Enterprises Ltd., Mahindra Lifespace Developers Ltd., Godrej Properties Ltd., Oberoi Realty Ltd. & Kolte Patil developers.  

ANAROCK research reveals that these companies together sold approx. 44 mn sq. ft. of housing in FY 2019 as against approx. 17 mn sq. ft. in FY 17 (DeMo period) and 27 mn. sq. ft. in FY 15. Their sales have collectively grown by 63% since the housing market's peak years of FY 15.

For instance, Godrej Properties sold over 8.5 mn sq. ft. of residential space in FY 19 as against 3 mn sq. ft. in FY 17, recording an almost three-fold jump in two years. When residential sales were at their peak levels in FY 15, Godrej Properties saw housing sales of approx. 3.6 mn sq. ft.

The housing space sold by the nine listed firms in Q1 of FY 20 (Apr-Jun) was nearly 17.5 mn sq. ft. in a single quarter - slightly less than half of the total space sold in all four quarters of FY 19. While the data for the three quarters of this financial year is still underway, we can expect sales to be much higher.

Supply Dynamics

An analysis of the new launch data trends of these nine listed real estate developers reveals that their new housing supply has more than doubled in two years – from approx. 28 mn sq. ft. in FY 17 to approx. 61 mn sq. ft. in FY 19. In the market's peak year of FY 15, their new launches amounted to nearly 46 mn sq. ft. This translates into a growth of 33% in FY 19 over FY 15.

Reduced Average Realization

With the increasing demand for affordable and mid-segment homes pulling even leading developers into the fray, the average realization of property prices of some players has also reduced since FY 17. For instance, the average price realization for Kolte Patil developers dropped from INR 5,836 per sq. ft. in FY 17 to INR 5,372 per sq. ft. in FY 19. Likewise, Prestige Estates also saw their average price realization drop from INR 6,441 per sq. ft. in FY 17 to INR 6,218 per sq. ft. in FY 19. 

Builders Trimming Debt Burden

Many developers who incurred massive debts during the sector's boom period are now looking to reduce their debt burden with rebooted business strategies. They are either selling their assets or their development rights, refinancing loans or speeding up project completions to improve sales.

While many players continue to struggle, the top 9 listed firms collectively reduced their debt burden by 8% in FY 19 as against FY 17. The collective debt of these 9 listed firms has reduced from INR 19,123 Crore in FY 17 to INR 17,508 Crore as on FY 19. (The total debt of each of these firms includes current and non-current debt as reported in their standalone financials).

Prominent Take-Aways

• Millennials’ preference for branded products now transcends electronics and fashion and extends to the homes they buy.
• The ongoing issue of stalled and delayed housing projects drives homebuyers to listed real estate developers to mitigate risks.
• Even the top developers have now recalibrated their project offerings. Their previous hard focus on the premium segments has given way to a greater emphasis on the high-demand affordable and mid-income segments. With more and more listed developers venturing into lower budget segments, the housing market's demand-supply gap has narrowed significantly.