“We note that a price-led asset-monetisation strategy by stressed developers would be more effective only in the case of completed inventory. Accordingly, the low proportion of completed inventory may curtail the collateral damage of the credit crunch on selling price for credible real estate developers,” said Murtuza Arsiwalla and Samrat Verma, analysts at Kotak. They said the extant inventory at the current levels of sales would take as much as 50 months to absorb. However, the current inventory could be absorbed within five to six months if incremental sales are directed towards completed inventory.
The top three cities are Mumbai Metropolitan Region (MMR), National Capital Region and Bengaluru.
With 30 million sq ft of completed inventory of the total 292 million sq ft, MMR has the highest inventory of all metro cities.
Of 30 million sq ft, 50 per cent are in Thane region, the report said.
The National Capital Region (NCR) has completed inventory of 23 million sq ft of the total outstanding inventory of 238 million sq. ft. Approximately, 80 per cent of the under-construction inventories are in Noida and Gurugram. Completed inventory in NCR can be absorbed in six months on the basis of 4 million sq ft of average monthly sales clocked over the past two years, it said.
Of all cities, Bengaluru has the least outstanding completed inventory at 21 mn sq ft (total inventory of 163 mn sq ft) though Kotak analysts concede that the presence of a large number of developers holding completed inventory (not restricted to top 50).
Completed inventory is expected to last for five months at current level of sales assuming no new launches.
The analysts noted that 65 per cent of the inventories belong to the top players in each market (restricted to top 50), while 35% belong to a long tail of developers.
Among cities, NCR is better placed with larger players accounting for 85% of the unsold inventory compared with 54% in Mumbai and 51% in Bengaluru.
The report said market share of listed developers increased to 39.2 per cent in June 2018 from 21.1 per cent market share in the same period last year. In Q1FY19, listed developers saw their sales increase at 29 per cent year-on-year compared with the industry sales that were down by 2 per cent y-o-y.
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