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The sustained sales momentum in the housing property market over the past three financial years has seen a strong improvement in the liquidity and credit profiles of major listed real estate developers since the outbreak of the Covid-19 pandemic.
Boom in residential demand across mid, premium and luxury segments including India’s top property markets Mumbai, Delhi-NCRBangalore, Pune, Kolkata, and Hyderabad has pushed both the collections and receipts of these companies higher.
The performance helped strengthen their leverage and credit profile and this is expected to continue over the medium term.
Gautam Shahi, director, Crisil Ratings, said, “The liquidity profile including cash and bank balances for the 11 listed developers has improved from Rs 9,046 crore in 2019-20 to around Rs 13,000-14,000 crore in 2022-23, despite the fact that large developers have deployed funds for land purchases during the last financial year.”
Sales of the top 11 large and listed realty developers are set to grow by nearly 50% year-on-year in 2022-23 in terms of sales value, while sales by area grew by nearly 20%. The high realization per sq ft for these developers reflects the preference for large and premium homes.
“The sales momentum in the property market has been strong over the years due to the underlying economic growth. Higher conversions along with stable sales and receivables have helped improve liquidity which allows for greater economic activity and velocity. This will lead to better execution and timely delivery which will ultimately help the 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, Purvankara, Sunteck Realty And Grace It is estimated to have declined by over 42% since the start of the pandemic in 2019-20.
These companies have repaid Rs 18,000-20,000 crore of debt during this period and their combined net debt has come down by over 50% from Rs 44,780 crore as of March 2020 to Rs 20,500 crore as of March 2023.
“Continued offices with healthy economic growth and hybrid working model are keeping the demand for residential real estate stable in this financial year, especially for large and premium residences. This demand is expected to remain stable at 8-10% despite a rise in interest rates and capital values due to the above reasons,” said Aniket Dani, Director, CRISIL Market Intelligence & Analytics.
According to him, the demand momentum is expected to continue as inventory remains at a comfortable level of nearly three years of sales on average, compared to more than 4.5 years before the pandemic. Hence, developers are in a strong position with more confidence on new launches to suit the growing demand.
Loans have come down due to strong collections, leverage of listed developers has improved significantly and the debt to total assets ratio is expected to be 20% by March 2024, as against around 45% at the start of the pandemic. Credit metrics of small and medium-sized developers have also improved, with the debt-to-total assets ratio expected to be 45-47% by March 2024, as against 54% before the pandemic.
However, according to experts, these players are more dependent on debt and new launches may need to tie up with large developers to benefit from the latter’s execution capability, strong balance sheet and quality reputation in line with the brand image.
Large developers are set to increase their market share to close to 30% this fiscal from 16-17% in FY2020, driven by continued strong sales and collections from their ongoing projects, easier access to bank finance and capital markets and increased consumer preference towards trusted and reputed brands.
