Realty to see mixed

Harsha Jethmalani harsha j@htlive.com

he residential realty mar ketisinanupcycle, yetreal

estate companies' Decem ber quarter (Q3FY25)

results would bring selectivecheer.

Withapproval-related challenges easing, sequential improvement in pre-sales or bookings is likely for most listed companies. However, a high base, coupled with muted launches, would mar year-on-year bookings growth for those largely dependent on new projects.

Seasonality and delayed approvals led to muted launches, hampering pre-sales momentum in the half-year ended September (Hl). Grade A developers, particularly those with exposure to Bengaluru, such as Sobha Ltd, Prestige Estates Projects Ltd, and Brigade Enterprises Ltd saw delaysinregulatoryapprovals.

Sobha launched just one new projectin Q3 of 11 million square feet in Bengaluru. Its pre-sales fell 29% on-year to 31,388 crore but rose sequentially, showed its Q3 opera Easing burden

Strong cash flows aided by robust sales has given listed realty companies

room to deleverage.

Total net debt (in crore)

FY16 FY17 FY18 FY19

Note: Aggregate data for seven real estate companies

under Jefferies coverage

tionalupdate. Prestige launched one project in Q3, while Sunteck and Kolte Patil saw no launches.

Those having inventory for sustainedsales, such as Godrej PropertiesLtd, DLF Ltd, Oberoi Realty Ltd, and Brigade Enterprises Ltd, would posta good show. Plus, these companies saw new project launches.

FY20

FY21 FY22 FY23 FY24 EY25

estimated

Source: Companies,

Jefferies India SATISH KUMAR/MINT

Inits Q3 update, Macrotech DevelopersLtd (Lodha)said it clocked presales 0fX4:510 crore, up 32% on-year and 5% sequentially—its best-ever quarter. Lodha hasalarge numberof ongoing projects, which aided its pre-sales trajectory, although it didn't launch anew one in Q3.

While Q3 maynotbe very exciting

Q3, hecticQ4

for realty investors, easing supply constraints points to an actionpacked March quarter. “Q4FY25 is expected to see a surge in launches from Aditya Birla Real Estate, Prestige, Sobha, Godrej Properties, DLF, Brigade, Sunteck Realty, and Kolte Patil Developers,” said a I January Antique Stock Broking Ltd report.

Whether companies canmeet theirambitious FY25 pre-sales targets (15-20% on-year growth) depends on how launches shape up in Q4.

Developers have strengthened their balance sheets, aided by robust cash flows and equity fundraises. This has helped aslew oflisted companies to pare debt aswell asexpand into new geographiesto containthe concentrationrisk.

An analysis by Nuvama Research showed that in HI, land-related capital expenditure (capex) rose to 33% versus 29% in FY24. Despite higher capexspends, net debtreduced for 11 developers compared to nine in

BRICK BY BRICK

SEASONALITY and approval delays muted launches, slowing pre-sales momentum in H1

WHILE Q3 may be dullforrealty investors, easing supply hints at an active March quarter

FY24. Strong housing demand and low inventory are expected to increase focuson development activities, which may keep developers’ land capex elevated in the near term. Nifty Realty was one of the top three indices in 2024, fetching 34% returns. Valuations have run up, and developers need to deliver on pre-sales targets. A potential rate cut by the Reserve Bank of India could boost demand for the languishing affordable housing segment. But elevated prices in the premium and luxury segments need monitoring amid a spate of new supply. “Residential prices have increased by an average of around 15% on-year in 2024,” said a Jefferies India report on 8 January. While pricing remains fairly co-related with inventory, Jeffries remains watchful of any big jump in investor activity, likely triggered by higher pricing, as itmaydrive regulatoryaction by the central bank and/or government.