Signs of revival in realty sector: New schemes will do well, say experts

In an investor call with analysts, the country’s largest realty firm, DLF, said the firm would be debt free by 2018-19 — a plan hinged on its massive inventory of Rs 150 billion.

In the last two months of 2017, the firm has been able to make sales of Rs 6.6 billion of its residential properties. “We don’t see an issue in achieving this (paying off debt),” Saurabh Chawla, the firm’s group chief financial officer, said in the call. DLF believes both the commercial and residential segments are witnessing revival.

“Buyers are looking for apartments in the super luxury, luxury and premium segments. Our track record of delivering projects and meeting customer expectations in the past and now has resulted in renewed demand. We resumed sales from November 1 last year and clocked sales worth Rs 6.6 billion in the residential sector in two months (November and December),” the company said in response to a questionnaire sent on its growth plan.

It is not just DLF is regaining its confidence in the residential sector after facing a lull for homebuyers for around five years, the industry is confident that 2018 can bring things back on track.

Some companies were witnessing a 50 per cent jump in sales as many claimed that the bounce back in sales came in the third quarter. “In Q3 FY18, we sold 151,763 sq ft across 68 units as against 106,214 sq ft across 54 units in Q3 FY17. That is a jump of 42 per cent in the total area sold and 25 per cent in the number of units,” a spokesperson for Oberoi Realty said.

For the sector, 2017 turned out to be the year of formalisation of Indian economy, with key reforms such as demonetisation, goods and services tax (GST), and Real Estate Regulatory Authority (RERA) being implemented.

According to analysts, because of several government pushes for affordable housing, absorption in the price bracket of less than Rs 4 million is gradually rising. “The share of sub-Rs 4 million apartments in the overall absorption stood at 39 per cent in Q1 of calendar year (CY) 2017, and jumped to 45 per cent in Q4 CY17. The percentage share of the price bracket of less than Rs 25 million properties has also increased from 2 per cent in Q1 CY17 to 5 per cent in Q4 CY17,” said Anuj Puri, chairman, ANAROCK Property Consultants. However, he added that while analysing the overall absorption data for CY17, it is evident that it has gradually come down after implementation of RERA and GST.

Metropolitans, which had witnessed a slowdown, are now getting back on track as more homebuyers are showing interest.

“There has been a revival in residential sales in the Q3 FY17-18. L&T Realty has seen an upswing in the sales across our three projects in Mumbai and Bengaluru. Our recently launched project, Emerald Isle, Phase-II in Powai, has drawn an unprecedented interest, generating around 2,000 walk-ins in 120 days. Also, the sales velocity at our maiden project in Bengaluru is at all-time high. Our total gross sales for Q3 FY17-18 stand 20 per cent higher than the sales of Q3 FY16-17,” said Shrikant Joshi, chief executive officer and managing director (MD), L&T Reality.

Bengaluru-based Puravankara saw a marginal jump in residential sales bookings in FY18 as compared to FY17. The firm, however, said it witnessed a substantial increase in the number of customer queries in the current financial year. “In 2017, the sector saw several regulatory reforms, which transformed the very DNA of the sector. However, Bengaluru remained stable in comparison to other cities owning to steady economic activities. In fact, the market saw renewed consumer confidence after the initial lull,” said Ashish R Puravankara, MD, Puravankara.

Confirming an uptick in Bengaluru residential sales, A S Sivaramakrishnan, head of Residential Services, India, CBRE South Asia, said, “To encourage demand, the focus of developers has been on extending existing schemes and offers for ready-to-move in properties. There is also a renewed focus on delivery of projects. Additionally, the increased activity in the commercial/office segment as well as completion of the Metro (phase-I) is positively impacting the city’s housing market.”

Another Bengaluru-based firm Sobha said it was able to achieve a new sales volume of 2.6 million sq ft valued at Rs 20.49 billion in the current financial year. “The FY17-18 will be the best ever year for us, both in volume and value terms,” said J C Sharma, vice-chairman and MD, Sobha.

Experts, however, believe that while a full-scale recovery is still few quarters away, those with good track records, new launches and attractive subvention schemes will perform well.  “Overall, 2018 (FY19) will be a year of market recovery defined by restricted new launches, gradually improving sales and declining unsold units. The realty sector is now settling down and imbibing the recent reforms and structural changes,” Puri added.