 "Real estate Q4 preview signals strong foundations despite presales dip")
Leading real estate companies are expected to report a 9-19.2 per cent growth in revenue for the fourth quarter ended March, driven by continued demand and timely completion of projects.
Motilal Oswal expects presales to moderate due to a lack of launches. The brokerage firm anticipates its coverage universe to report presales of Rs 25,000 crore, up 4 per cent year-on-year (Y-o-Y) but down 11 per cent quarter-on-quarter (Q-o-Q) in the fourth quarter (Q4) of 2023-24 (FY24).
Cumulative bookings for FY24 are expected to reach Rs 90,700 crore, up 33 per cent Y-o-Y, exceeding the initial expectation of 15-20 per cent growth.
“Although the pace of launches picked up in the third quarter of FY24, it could not be sustained in Q4, despite a strong project pipeline, as many companies faced delays in approval. Hence, a few companies witnessed a moderation in bookings on a sequential basis,” Motilal Oswal said in a pre-earnings note.
Motilal Oswal projects that among all companies, Godrej Properties, Mahindra Lifespaces, and Prestige Estates are expected to report the strongest Y-o-Y growth in bookings.
Godrej had another strong quarter of launches with eight new projects/phases across the Mumbai Metropolitan Region, Pune, Gurugram, and Kolkata, covering approximately 7 million square feet with a gross development value of Rs 8,000 crore.
Launches, combined with Rs 16,000 crore worth of inventory, could enable Godrej to report presales of Rs 6,500 crore, up 60 per cent Y-o-Y.
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Motilal Oswal expects Mahindra Lifespaces to report presales of Rs 1,500 crore, a fourfold increase Y-o-Y driven by a strong response to its Kandivali project.
Accordingly, presales in FY24 are projected to jump 60 per cent Y-o-Y to Rs 2,800 crore, surpassing its 2024-25 guidance of Rs 2,500 crore a year in advance.
Prestige Estates had one small launch in Bengaluru worth Rs 800 crore in Q4; however, strong sales momentum for its Rs 16,000 crore of ongoing inventory should lead to presales of Rs 4,700 crore for the quarter. Accordingly, the company is expected to report presales of Rs 21,000 crore in FY24, up 62 per cent Y-o-Y.
“With a favourable demand-supply balance, a comfortable inventory position, and healthy pricing power, we expect buoyancy to continue in the real estate sector. Most of the listed companies are trading above the value of their existing pipelines, so we prefer companies that can outperform their peers and whose valuations do not reflect this outperformance,” Motilal Oswal said in a report.
The real estate sector is expected to see continued presales booking momentum in Q4, as indicated by operational updates from Macrotech (up 40 per cent Y-o-Y at Rs 4,230 crore) and Puravankara (up 93 per cent Y-o-Y at Rs 1,947 crore).
“DLF may see normalisation of presales due to a high base both Y-o-Y and Q-o-Q, while Oberoi Realty is expected to see healthy growth. We anticipate decent Y-o-Y sales booking growth for Mahindra Lifespaces and Arvind SmartSpaces. Overall, we estimate revenue/operating profit/net profit (except Suraj Estate Developers) to vary by 19.2 per cent/87.9 per cent/46.5 per cent Y-o-Y. Management commentaries on future project launches and new business developments would be keenly watched,” brokerage firm Sharekhan said in a note.
According to real estate consultancy firm Anarock, residential sales in FY24 reached a decadal high, with almost 500,000 units sold (up 30 per cent Y-o-Y). Despite new project launches of over 100,000 in Q4FY24, available inventory in the top seven cities dropped by 7 per cent annually.
Anarock also highlighted that listed developers like Prestige Estates, DLF, Godrej Properties, Sobha, and Oberoi Realty have been on a land-buying spree since the pandemic amid significant demand for their properties.
“Given that these players have been snapping up choice land parcels, it is likely that they will continue to launch projects in the coming quarters. Among many others, these players have recorded high sales in the past one to two years and they have very strong balance sheets. They will continue to perform well,” said Prashant Thakur, regional director and head of research at Anarock Group.