The buoyancy in residential demand in mid, premium and luxury segments across India’s top property markets including Mumbai, Delhi-NCR, Bangalore, Pune, Kolkata, and Hyderabad has pushed both collections and realisations of these companies’ higher.
The performance has helped in strengthening their leverage and credit profiles and this is expected to sustain over the medium term.
“Liquidity profile including cash and bank balances for 11 listed developers has improved to around ₹13,000-14,000 crore in 2022-23 from ₹9,046 crore in 2019-20, despite the fact that large developers have deployed funds for land purchases during the last fiscal,” Gautam Shahi, director, CRISIL Ratings.
The sales of top 11 large and listed realty developers rose around 50% year-on-year in 2022-23 in value terms, while the area sold increased nearly 20%. The higher realisation per sq ft for these developers reflects the preference for bigger and premium homes.
“Sales momentum in the property market has been robust over the last couple of years owing to the underlying economic growth. Steady sales and higher conversions along with realisations have helped improve the liquidity that allows more economic activity and velocity. This will lead to better execution and timely delivery that ultimately helps homebuyers,” said Jaxay Shah, CMD, Savvy Group.Gross debt of 11 listed large residential realty developers including Brigade Enterprises, DLF, Godrej Properties, Kolte-Patil Developers, Macrotech Developers, Mahindra Lifespace, Oberoi Realty, Prestige Estates, Puravankara, Sunteck Realty and Sobha is estimated to have declined over 42% since the start of pandemic in 2019-20.These companies have repaid debt worth ₹18,000-20,000 crore during this period and their combined net debt has declined over 50% to ₹20,500 crore as of March 2023 from ₹44,780 crore as of March 2020.
“Healthy economic growth and offices continuing with the hybrid working model is keeping demand for residential real estate steady this fiscal, especially for bigger and premium residences. This demand is expected to hold firm at 8-10% despite rise in interest rates and capital values for the aforesaid reasons,” said Aniket Dani, director, CRISIL Market Intelligence & Analytics.
According to him, the demand momentum is expected to continue owing to inventory being at comfortable levels of around three years of sales on an average as against over 4.5 years before the pandemic.
Developers, therefore, are on a stronger footing with greater confidence on new launches getting absorbed in line with incremental demand.
With robust collections leading to reduced debt, the listed developers’ leverage has improved substantially with debt to total assets ratio expected at 20% by March 2024 compared with around 45% at the start of the pandemic.