Millennials prefer branded products

The top 9 real estate developers listed at the stock exchange have beaten the housing sector’s downturn blues, with a total sales value of FY 19 was approximately Rs.228 billion in FY 2019.

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%, reported ANAROCK Property Consultants

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 and Kolte Patil developers, wrote ANAROCK Chairman Anuj Puri.

ANAROCK research reveals that these companies together sold approx. 44 million sq. ft. of housing in FY 2019 as against approx. 17 million sq. ft. in FY 17 (DeMo period) and 27 million 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 million sq. ft. of residential space in FY 19 as against 3 million 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 million sq. ft.

The housing space sold by the nine listed firms in Q1 of FY 20 (Apr-Jun) was nearly 17.5 million 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.

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 million sq. ft. in FY 17 to approx. 61 million sq. ft. in FY 19.

In the market’s peak year of FY 15, their new launches amounted to nearly 46 million sq. ft. This translates into a growth of 33% in FY 19 over FY 15.

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 Rs.5,836 per sq. ft. in FY 17 to Rs.5,372 per sq. ft. in FY 19. Likewise, Prestige Estates also saw their average price realization drop from Rs.6,441 per sq. ft. in FY 17 to Rs.6,218 per sq. ft. in FY 19.

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 Rs.19,123 crore in FY 17 to Rs.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. fiinews.com