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The real estate sector is notorious for cash deals, where circle rates account for a mere 30% of the sale value of a property; 70% being paid in cash. Photo: Aniruddha Chowdhury/Mint
The real estate sector is notorious for cash deals, where circle rates account for a mere 30% of the sale value of a property; 70% being paid in cash. Photo: Aniruddha Chowdhury/Mint

Residential realty sector witnesses K-shaped recovery

  • Timely liquidation of the high unsold inventory, particularly in over-supplied regions such as Mumbai Metropoliton Region and National Capital Region, and adequacy of operating cash flows to meet debt obligations would be key look-out areas

NEW DELHI: The residential real estate sector has witnessed green shoots of a recovery during the fourth quarter, supported by festive and pent up demand. According to an ICRA report, large, listed players were major beneficiaries of the high demand leading to a K-shaped recovery for the sector.

“The residential realty sector is witnessing a K-shaped recovery, with large-listed players recovering at a much better pace than smaller, unorganized players. While the broader market remained 24% below pre-covid levels on a year-on-year basis in Q3 FY21 and 39% below pre-covid levels in 9M FY21, the top 10 listed realty players witnessed 61% year-on-year growth in Q3 FY21 and 13% growth in 9M FY21," the report published on Monday said.

The woes of the residential sector, which had witnessed a slowdown over the past few years, were further exacerbated following the covid-19 outbreak. The pandemic triggered a demand collapse, with housing sales volume witnessing a year-on-year decline of 62% in Q1 FY21 across the top eight cities, but large developers with a good track record benefitted from the recovery in demand while small developers were hit hard, ICRA said.

Covid also led to a consolidation in the sector leading to an increase in the share of listed players. “The market share of the top 10 listed realty players has nearly doubled in the current year, increasing from 11% of sales in FY20 to 19% in 9M FY21. Larger developers have been benefiting from demand consolidation and better credit availability. In terms of launches as well, their market share has increased from 11% in FY20 to 22% in 9M FY21," it added.

“Home-buyers had been leaning towards developers with an established track record of on-time and quality project completion even prior to the onset of the pandemic. This had resulted in large, listed players reporting healthy sales and collections in recent years, despite the prevailing liquidity crisis and unfavourable supply-demand dynamics," said Shubham Jain, senior vice president and group head, ICRA.

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