Signs of revival in real estate sector
In an investor call with analysts, the country’s largest realty firm, DLF, said the firm would be debt free by 2018-19 — a plan hinged on its massive inventory of ~150 billion.
In the last two months of 2017, the firm has been able to make sales of ~6.6 billion of its residential properties. “We don’t see an issue in achieving this (paying off debt),” Saurabh Chawla, the firm’s group chief financial officer, said in the call. DLF believes both the commercial and residential segments are reviving.
“Buyers are looking for apartments in the super luxury, luxury and premium segments. Our track record of delivering projects and meeting customer expectations has resulted in renewed demand. We resumed sales from November 1 last year and clocked ~6.6 billion in the residential sector in two months,” the company said in response to a questionnaire sent on its growth plan.
DLF is not alone in regaining confidence on the residential sector after facing a lull from homebuyers for around five years. The industry is confident that 2018 can bring things back on track.
Some companies were witnessing a 50 per cent jump in sales as many claimed that the bounce back in sales came in the third quarter. “In Q3 (December quarter), we sold 151,763 sq ft across 68 units, as against 106,214 sq ft across 54 units in Q3 FY17. That is a jump of 42 per cent in total area sold and 25 per cent in the number of units,” said a spokesperson for Oberoi Realty.
In 2017, the real estate sector was buffetted by demonetisation, the goods and services tax (GST), and the Real Estate Regulatory Authority (RERA).
According to analysts, because of several government pushes for affordable housing, absorption in the price bracket of less than ~4 million is gradually rising. “The share of sub-~4 million apartments in overall absorption stood at 39 per cent in Q1 (Jan-March), and jumped to 45 per cent in Q4. The percentage share of the price bracket of less than ~25 million properties has also increased, from 2 per cent in Q1 to 5 per cent in Q4,” said Anuj Puri, chairman, Anarock Property Consultants. However, he added it has gradually come down after implementation of RERA and GST.
Metropolitans, which had witnessed a slowdown, are now getting back on track as more homebuyers are showing interest.
“There has been a revival in residential sales in Q3 FY18. L&T Realty has seen an upswing in sales across our three projects in Mumbai and Bengaluru. Our recently launched project, Emerald Isle Phase-II in Powai, has drawn unprecedented interest, generating around 2,000 walk-ins in 120 days. Also, the sales velocity at our maiden project in Bengaluru is at an all-time high. Our total gross sales for Q3 stand 20 per cent higher than the sales of Q3 FY17,” said Shrikant Joshi, chief executive officer and managing director (MD), L&T Realty.
Bengaluru-based Puravankara saw a marginal jump in residential sales bookings in FY18, as compared to FY17. The firm, however, said it witnessed a substantial increase in the number of customer queries. “In 2017, the sector saw several regulatory reforms, which transformed the very DNA of the sector. However, Bengaluru remained stable in comparison to other cities, owing to steady economic activities. In fact, the market saw renewed consumer confidence after the initial lull,” said Ashish R Puravankara, MD, Puravankara.
Confirming an uptick in Bengaluru residential sales, A S Sivaramakrishnan, head of Residential Services, India at CBRE South Asia, said, “To encourage demand, the focus of developers has been on extending existing schemes and offers for ready-to-move in properties. There is also renewed focus on delivery of projects. Additionally, the increased activity in the commercial/office segment, as well as completion of the Metro Rail (phase-I) is positively impacting the city’s housing market.”
Another Bengaluru-based firm Sobha said it was able to achieve a new sales volume of 2.6 million sq ft, valued at ~20.5 billion in the current financial year. “FY18 will be the best ever year for us, both in volume and value terms,” said J C Sharma, vicechairman and MD, Sobha.
Experts say while full-scale recovery is still a few quarters away, developers with a good record, new launches and attractive subvention schemes will perform well.
“Overall, 2018 (FY19) will be a year of market recovery, defined by restricted new launches, gradually improving sales and declining unsold units. The realty sector is now settling down and imbibing the recent reforms and structural changes,” Puri added.