Highrise hopes: Setting realty's H2 revival in stone, brick by brick

A solid launch pipeline lays the groundwork to close the cracks of H1FY25

For the second consecutive quarter in 2024-25 (FY25), the real estate residential sector saw fewer launches, and inventory sales fell short of expectations. The slow pace of launches led to weak performance from listed developers during the July-September (Q2) quarter of FY25.

 

This drop in sales caused the BSE Realty index to underperform the S&P BSE Sensex in recent months. The realty index has declined by 10 per cent from its peak on September 26, while the benchmark index has dropped by 7 per cent over the same period. Despite this, brokerages remain confident about major real estate companies, highlighting a solid launch pipeline for the second half (H2) of the financial year, manageable debt levels, and the possibility of rate cuts as potential drivers of recovery.

 

Among the larger listed developers, Oberoi Realty, Brigade Enterprises, and Signature Global (India) delivered impressive growth in pre-sales or bookings, ranging from 46 to 184 per cent year-on-year (Y-o-Y). In contrast, DLF reported a 69 per cent drop, Prestige Estates Projects fell 43 per cent, and Sobha saw a 32 per cent decline. 

 

 

Overall, pre-sales decreased by 5 per cent Y-o-Y and 26 per cent sequentially, mainly due to fewer launches from top developers, which were delayed by approval issues, particularly in Bengaluru. Launches by major developers dropped by 1 per cent Y-o-Y.

 

Despite these obstacles, brokerages point out that approval processes are being resolved, and developers are preparing for a stronger second half of the year. However, they will need to play catch-up to meet FY25 targets and launch projections.

 

Analyst Biplab Debbarma from Antique Stock Broking observes, “Of the sales booking estimate of Rs 1.22 trillion for FY25, the covered companies have reached around 40 per cent in pre-sales, with the remaining 60 per cent expected in H2FY25.”

 

While companies such as Godrej Properties and Macrotech Developers (Lodha) are well-positioned to meet their targets, having achieved 51 per cent and 48 per cent of their goals, respectively, in the first half (H1) of FY25, others like Prestige Estates and Aditya Birla Real Estate need to secure over 70 per cent of their targets in H2FY25. Brokerages remain hopeful that most developers will successfully launch projects and meet their projections. Their top picks include Aditya Birla Real Estate and Oberoi Realty.

 

Analysts Parvez Qazi and Vasudev Ganatra from Nuvama Research note that the H2FY25 launch pipeline is promising, with bookings expected to ramp up. Further, potential rate cuts could act as a catalyst for the sector, sparking a rerating for real estate developers. Prestige Estates and Brigade Enterprises are their top sector picks.

 

A key advantage for listed developers is their comfortable debt position. Kotak Securities highlights that net debt has reduced in recent years, supported by healthy cash flows and recent equity raises. While some developers have net cash flow in their residential business, their strong balance sheets will allow them to expand their land banks and secure long-term growth.

 

Kotak Securities remains constructive on the sector, favouring DLF, Brigade, and Signature Global at current prices.

 

The combination of manageable debt, a solid launch pipeline, and strong execution has allowed leading listed developers to maintain market share, which remains higher than pre-pandemic levels. These trends are expected to improve as launches and offtake gain pace.