Large real estate developers could deliver double-digit growth in 2022-23 (FY23), given the strong sales momentum, market-share consolidation, launch pipeline, and lower leverage, a report by Business Standard stated.
As per the report, the top 10 listed developers have highlighted this at the end of a record January-March quarter, powered by the highest-ever bookings and improving collections.
The Nifty Realty index has underperformed benchmarks in 2022 YTD, down 20 percent as against an 8.5 percent decline in Nifty50.
Highlighting the significant sales uptick, Rupesh Sankhe, vice-president and power analyst, Elara Securities told BS that the 42 percent year-on-year (YoY) growth in 2021-22 (FY22) happened regardless of the Delta and Omicron variants of the novel coronavirus, Russia-Ukraine war-led inflation spike, and real threat of rising interest rates.
While there was a 5-7 percent increase in prices by real estate players to take the edge off cost inflation, rising income levels, low-interest rates, and favourable demographics ensured strong affordability/volumes, added Elara.
Quoting domestic brokerage house Motilal Oswal Securities (MOSL), BS stated that MOSL believes the impact may not be palpable.
“Construction costs grew 12-15 percent on a headline basis, leading to a marginal impact of not more than 3-6 percent. Companies, on average, have raised prices by 5-8 percent and mitigated a large part of the cost increase,” the brokerage said.
It further noted that the steel prices have fallen 15 percent from their peak, which will cushion the cost and margin pressures on larger realty players.
MOSL prefers players possessing the ability to generate robust cashflow over the next three to four years and invest in developing their pipeline, leading to further growth visibility and a rerating of their stocks, stated the BS report.
MOSL’s top picks are Macrotech Developers (formerly known as Lodha Developers) and Oberoi Realty. It has a ‘neutral’ rating on Godrej Properties and DLF.
