Page 20 - April 2022

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ESTABLISHED RESIDENTIAL REALTY DEVELOPERS SET FOR disruption period with each passing wave, with sales at 70-75% of
30-35% SALES GROWTH IN FY22, SAYS REPORT the pre-pandemic level during the second wave compared with
Established residential real estate developers are likely to witness 50-55% during the first and recovery at one quarter as against
30-35% growth in revenue in the current financial year as against two quarters during the preceding one, underlining the sector’s
14% growth a year ago. For the next financial year, these resilience. Meanwhile, selling prices of houses in the six cities are
developers are expected to see revenue growth of 10-15%, said expected to increase marginally in the near future as realtors pass
ratings agency CRISIL Ratings. on the impact of higher labour and material costs, and as the
Top 11 listed realty developers sold nearly `34,000 crore of demand-supply dynamics improves, the ratings agency said.
inventory in the first nine months of this financial year 2021-22, The inventory level in these cities has declined to nearly 2.5 years,
equal to sales in the entire last fiscal, reflecting a significant compared with over 3.5 years as of March 2019. The ability of
recovery in the housing market. realtors to command price hikes will vary though, depending on
Improved affordability and preference for larger homes owing to brand strength and the resultant demand pull.
a surge in remote working driven by the Covid-19 pandemic have That said, the pandemic has amplified the difference in the
fuelled this boom. performance of established and financially prudent developers
The ratings agency has assessed top 11 listed realty developers versus their leveraged counterparts. Despite a downcycle in the
including Brigade Enterprises, Godrej Properties, Kolte-Patil past few fiscals, established realtors have delivered projects on
Developers, Macrotech Developers, Mahindra Lifespace time. They have also deleveraged in the five fiscals through 2022
Developers, Oberoi Realty, DLF, Prestige Estates Projects, by raising equity and monetising commercial assets and land
Puravankara Ltd, Sobha, and Sunteck Realty for this analysis. worth nearly `50,000 crore.
As a result, the market share of these 11 listed players in India’s top “The established realtors have strengthened their credit profiles. The
six cities has risen to 20-22% currently from 14-16% before Covid-19 debt to total assets ratio of these realtors is expected to improve
struck. Besides strong residential sales, equity raising, and asset to ~25% by March 2022 from ~45% five years ago. Significant
and land monetisation have helped these players navigate the opportunities through joint ventures and joint development will
pandemic and strengthen credit profiles. help these realtors log healthy growth without compromising on
“Increased affordability due to low interest rates and flattish their credit risk profiles,” said Kshitij Jain, Associate Director, CRISIL
capital values, rising demand for bigger homes, and government Ratings.
measures in the past two fiscals have provided a fillip to residential Some mid-sized developers, which have historically maintained
realty. After the setback in the first half of last fiscal due to the low leverage, are also well-placed in the current scenario.
first wave, the sector has grown steadily through the second and However, leveraged developers will continue to lose market share
third waves,” said Anand Kulkarni, Director, CRISIL Ratings. “Hence, as they are crippled by high debt to total assets ratio of above
established residential realtors are likely to see 30-35% growth this 50%, weak liquidity, and limited ability to raise equity or monetise
fiscal versus 14% last fiscal For the next fiscal, we see growth at commercial assets. However, these realtors may choose to enter
10-15%.” into partnerships with their established counterparts for project
To be sure, the sector has seen lower impact and a shorter development.

20 CONSTRUCTION OPPORTUNITIES|APRIL 2022