Similarly, launches increased by 41% YoY to ~328,000 units in CY22, exceeding sales for the first time in the last nine years, aided by robust demand and low inventory across top cities leading to a surge in supply.
As a result, inventory increased by 4% YoY to ~453,000 units.
Low inventory and strong demand helped developers pass on the cost pressure, with 4-7% price increases across the top eight cities.
The RBI’s move to tackle inflation with a 225bp increase in the repo rate in the last eight months has led to a 200bp increase in mortgage rates and a corresponding increase in home loan EMIs.
The top 3 cities, MMR, NCR, and Bengaluru, outperformed industry growth, posting 35%, 67% and 40% growth, respectively. Sales across the markets surged to a nine-year high. NCR reported a 3x jump in supply to ~63,000 units.
The inventory overhang in most markets, except for MMR and NCR, was below the comfortable level of 18 months, which is conducive for price hikes.While sales in the top eight cities grew by 34% YoY in CY22 on a lower base, the top 12 listed companies reported 24% growth in sales volume.
Sales volumes in MMR and Pune exceeded the previous peak; however, sales volumes in NCR and Bengaluru were still 8%/27% lower than their CY12-13 peaks.
As we remain watchful of further growth potential in MMR and Pune, we believe Bengaluru and NCR are expected to contribute a large part of growth hereon; hence, overall industry growth will be modest at 5-10%.
Most of the listed peers are targeting at least two new markets apart from their home market, which will lead to a further pickup in the market share of listed peers.
While full-year leasing was strong, Q4CY22 did see some deceleration in absorption, with the weakening global growth outlook hurting the expansion plans of IT sector tenants.
Overall, the IT sector continued its dominant position and constituted 28% of total leasing in CY22. Gross leasing in Bengaluru increased by 19% to 14.5msf; Pune witnessed a significant increase in the share of co-working along with others as their combined share increased to 73% in CY22 v/s 28% in CY21
We expect residential demand to remain unabated despite further rate hike expectations, as the industry continues to witness long-term pent-up demand and affordability will remain better than the pre-Covid level.
We believe listed real estate players will continue to outperform the industry as they target scale-ups in markets beyond their existing exposure, which will play out in the next couple of years.
: Target Rs 550
Mahindra Lifespace’s residential and IC&IC segment performance remains on track and hence, we retain our pre-sales and cash flow estimates.
We believe continued strong momentum in project additions at a targeted GDV addition of INR30-40b will provide growth visibility and is a key upside trigger for the stock.
Brigade Enterprise: Target Rs 720
We remain positive on Brigade given demand momentum remains intact owing to favourable affordability despite 200bps increase in interest rate.
The company expects to launch 13msf of projects over the next 12 months and has re-iterated its sales volume target by 15-20% over the next three years.
On the back of a strong launch pipeline, we expect BEL’s pre-sales to record a 17% CAGR to 7msf by FY25.
(The author is Head – Retail Research,
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)
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