Prices across India increased 6% yoy to Rs5,260 per sq. ft in March 2019 from Rs4,950 per sq. ft in March 2018.
Residential real estate ended FY2019 with 7% yoy growth in sales and 6% yoy decline in launches for full year FY2019, with trends accelerated in March 2019, reflecting a 43% yoy decline in launched against 10% yoy growth in sales. The ongoing liquidity crunch further propelled consolidation, with the market share of our coverage universe increasing to 14% (among Top-3 cities) as of March 2019. Strong performance by listed real estate players in 4QFY19.
Steady sales, declining launches have led to a decline in inventory; flat realizations
All-India real estate sales across major cities in India clocked sales of 37.3 mn sq. ft in March 2019 (+10% yoy), taking total sales in FY2019 to 443 mn sq. ft, an increase of 7% yoy from 413 mn sq. ft in FY2018.
Launches across India had declined by a staggering 43% yoy in March 2019 amid uncertainty over GST rates as well as the liquidity crisis, in turn leading to launches in FY2019 declining 6% yoy to 286 mn sq. ft. A decline in launch activity was visible across all key metro cities—particularly in Bengaluru, which saw a sharp decline of 64% yoy in March 2019.
Declining launches and improving sales momentum have continued to aid draw-down of inventory, with all-India inventory declining 11% yoy to ~1.23 bn sq. ft from 1.4 bn sq. ft in March 2019. On a trailing twelve months basis, outstanding inventory is expected to be liquated in 33 months, an improvement from 40 months in March 2018. Prices across India increased 6% yoy to Rs5,260 per sq. ft in March 2019 from Rs4,950 per sq. ft in March 2018.
Sales activity in NCR remained steady in March 2019:
Sales activity in NCR remained steady in March 2019 with sales of 4.3 mn sq. ft (+28% yoy), with a major contribution coming from Greater Noida (1.7 mn sq. ft) and Gurugram (1.3 mn sq. ft). On an annual basis, sales averaged 4.4 mn sq. ft in FY2019. Even as launch activity declined in other metros, launches in NCR remained steady at 3.7 mn sq. ft in March 2019, against a monthly average of 2.5 mn sq. ft in FY2019. Net unsold residential inventory in NCR stood at 221 mn sq. ft as of March 2019 and is equivalent to 50 months of sales (based on the average of trailing 12 months). Realizations remained flat yoy in March 2019 at Rs 5,055 per sq. ft despite an increase of 4% sequentially.
Launches in MMR declined due to a slowdown in launches in Thane and Mumbai:
Launches in MMR declined to 2 mn sq. ft (-49% yoy) in March 2019 due to a slowdown in launches in Thane (1.2 mn sq. ft in March 2019 against monthly average of 2.4 mn sq. ft in FY2019) as well as Mumbai (-35% yoy). Despite weak launches, sales remained upbeat at 6.7 mn sq. ft (+17% yoy) in March 2019—an average of 6.8 mn sq. ft seen in FY2019. MMR has witnessed the sharpest decline in inventory among all regions, even as outstanding inventory still remains the highest at 272 mn sq. ft as of March 2019 (from 303 mn sq. ft in March 2018), which is expected to be absorbed in 40 months, basis the prevailing past 12-month sales.
Launches in Bengaluru remained the highest across key metros:
Launches in Bengaluru took a hit in March 2019, declining by strong 64% yoy to 1.7 mn sq. ft (against a monthly average of 4.3 mn sq. ft in FY2019) even as launches remained the highest across key metros at 51.5 mn sq ft in FY2019. Sales moderated at 61 mn sq. ft in March 2019. Unsold inventory at 153 mn sq. ft continues to be the lowest across regions in India. Realizations in March 2019 increased 3% yoy to Rs 4,940 per sq. ft.
Strong show continues from listed players.
Sales growth for the coverage universe was 38% yoy in 4QFY19 at Rs 58 bn in 4QFY19, compared to trailing three-month of 14% yoy for the industry with aggregate sales of Rs 574 bn.
Strong improvement in pre-sales was evident across all geographies, while the decline in realizations was largely due to the increased contribution of lower-ticket housing in overall sales volumes.
Repo rate reduced to 5.25% in June 2019 from 6.5% in August 2018.
RBI’s monetary policy committee decision to cut the repo rate for the third consecutive time by 25 bps in June 2019 has resulted in cumulative decline of 75 bps since August 2018. This is likely to give a breather to the real estate sector, which continues to grapple with a liquidity crisis along with issues like delayed housing projects and piling up of inventory. Outstanding loans to commercial real estate players grew 8% yoy to Rs 2 tn in April 2019 (Rs 1.8 tn in Mar 2018). Exposure to the housing sector (including priority sector) increased by Rs 1.8 tn yoy to Rs11.7 tn in April 2019. On input cost, all-India cement prices increased by Rs 8/bag in May 2019 to Rs 367bag of 50 kgs while rebar prices declined by 1% mom to Rs 40,800/ton in May 2019, down 9.3% yoy.