Market share of top 10 listed realty players triple in five years

Market share of top 10 listed realty players triple in five years

The market share of top 10 listed realty players has nearly tripled, increasing from 6% of sales in FY2017 to over 10% in FY2019 and FY2020, and rising further to 16% in the current year in the aftermath of Covid-19.

In terms of launches as well, their market share has increased to a 5-year high of 19%. As per an ICRA survey, carried out across 14 large, established developers with 296 projects launched for sale, larger developers are benefitting from demand consolidation and better credit availability, and thus, most expect operations to normalize within FY2022. This pace of recovery would be in-line with ICRA’s estimate of normalization within FY2022 for investment grade players.

Mahi Agarwal, Assistant Vice President and Associate Head at ICRA, said, “For the broader market, Covid-19 triggered one of the worst demand crashes in recorded history, with housing sales volumes witnessing a Y-o-Y decline of 35% during 9M FY2021 across the top eight cities of the country. However, larger players recorded a much better recovery, with the results of ICRA’s survey respondents indicating that 62% of the projects being developed by them witnessed less than 20% Y-o-Y sales decline. In terms of collections, while 60% of the projects being developed by survey respondents witnessed an adverse impact, largely on account of incremental home loan disbursements being adversely impacted due to lender re-evaluation of buyer credit profiles, inflows remained unaffected for 40% of projects being developed by survey respondents. On the execution side, construction activity has largely resumed across projects being developed by survey respondents, although with some increase in cost. Credit availability for larger developers is expected to support project execution going forward.

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. The implementation of RERA and GST further supported the market position of these larger players. Post Covid-19, better demand prospects, strong balance sheets and adequate liquidity have enabled larger developers to weather the storm better than smaller players, who have been finding it difficult to cope with the prevailing market conditions.

Given the recovery in demand witnessed till date, 50% of the survey participants expect sales and new launches to recover to pre-Covid levels within FY2022. A gradual unlocking of the economy and pent-up demand has been supporting housing sales. Moreover, the repo-linked lending rate (RLLR) for home loans has touched a historical low. This has resulted in improved affordability, and has been stimulating house purchases, at least from larger, reputed developers with a strong track-record of timely project completion and quality construction. Attractive discounts/payment schemes have provided further stimulus. With the onset of the pandemic, home/holiday-home ownership has also become more important.

“Overall operating cash flows for most developers, including the listed players, are expected to witness moderation in the current year, resulting in increased reliance on available liquidity and/or refinancing to meet committed outflows. However, the larger, organized players have maintained considerable liquidity buffers, and have low levels of leverage, together with high financial flexibility. These aspects would provide significant support in managing event-related shocks. Moreover, most large organized players with established brands, low leveraged balance sheets and adequate liquidity are expected to benefit from the likely acceleration in consolidation in the residential real estate segment. Range bound prices and low home loan rates are also expected to further support sales for these players,” said Agarwal.

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