Real estate sector Q2 Performance: Record presales in Q2, new launches to fuel momentum in Q3
Real estate sector Q2 Performance: Record presales in Q2, new launches to fuel momentum in Q3
Within micro-markets, consolidation story is expected to continue in the top six cities with strong volume-driven growth in Bengaluru, MMR and Pune, while NCR growth will be driven largely by higher price appreciation in the luxury segment.
Real estate developers are reporting record presales in an otherwise seasonally weakest quarter and this momentum is expected to continue in the next quarter with new launches adding a multiplier effect to the presales, said a report by HDFC Securities. “Within micro-markets, we expect the consolidation story to continue in the top six cities with strong volume-driven growth in Bengaluru, MMR and Pune, while NCR growth will be driven largely by higher price appreciation in the luxury segment,” analysts at HDFC Securities said while adding that geographical diversification is likely to continue with growth in presales from the non-core market. Further, it added that the pick-up in launches and higher supply will keep the average price realisation flattish.
A higher mortgage rate has the potential to hit affordable and mid-income housing whilst luxury demand remains indifferent as the luxury segment is driven by the wealth effect. The recent GDV addition by developers like Prestige, Godrej and Macrotech shows a higher tilt towards premium projects. “We are seeing higher presales growth from the premium real estate segment in the NCR and Bengaluru markets, which are resulting in higher average price realisation for developers,” the report said.
What’s driving physical occupancies?
According to the HDFC Securities report, large IT companies have mandated their employees to return to the office and so, physical occupancies are expected to increase from ~45-50 per cent to ~70 per cent by March 2024. “Since Covid, there has been a churn in these companies with a large part of the workforce now comprising freshers. There is a need to collaborate and learn. The increase in physical occupancies will lead to quicker decision-making on lease closure and hardening of office rentals,” the report stated.
On malls, HDFC Securities expect consumption fatigue to set in on a higher base as people look at newer avenues to spend, viz. hospitality, travel, etc. The upcoming festive season will continue to drive growth before it tapers off towards the end of 2HFY24.
“For the year FY23, we saw accelerated business development activities from top developers. Godrej added Rs 320 billion worth of GDV in FY23 against the guidance of Rs 150 billion. Macrotech also surpassed its BD guidance of Rs 150 billion by adding Rs 198 billion worth of GDV in FY23. We have seen encouraging BD activity with a strong GDV addition of Rs 143 billion by Macrotech (80 per cent of FY24 guidance) during H1FY24. Over the course of FY24, we expect a new land bank addition by our coverage universe,” HDFC Securities said. With robust balance sheets, low cost of capital and strong brands, organized players are at an advantage in adding new BD and are positioned for further market share gains.
Q2FY24 earnings trend
According to the report, expect the aggregate revenue/EBITDA/PAT for the coverage universe to report YoY growth by 30/32/37 per cent. On an aggregate level, we are expecting the YoY margin to expand by 137bps QoQ.
