Market share of listed sponsors increases, credit profile improves in FY22

BENGALERU : Established residential developers sold approx. 34,000 crore of inventory in the first nine months of 2021-2022, equivalent to sales in the prior year, reflecting a significant recovery in the housing market.

Improving affordability and a preference for larger homes due to an increase in remote working driven by the covid-19 pandemic have fueled this boom, Crisil Ratings said in a note Tuesday.

As a result, the market share of 11 listed players in the six Indian cities has fallen from 14-16% before the pandemic to 20-22% currently. In addition to strong residential sales, equity raising and monetization of assets and land have helped developers strengthen their credit profiles.

Listed estate agents assessed are Brigade Enterprises Ltd, DLF Ltd, Godrej Properties Ltd, Kolte-Patil Developers Ltd, Macrotech Developers Ltd, Mahindra Lifespace Developers Ltd, Oberoi Realty Ltd, Prestige Estates Projects Ltd, Puravankara Ltd, Sobha Ltd and Sunteck Realty Ltd . .

“Increased affordability due to low interest rates and sluggish capital values, growing demand for larger homes and government measures over the past two years have given residential real estate a boost. After the setback in the first half of the last fiscal year due to the first wave, the sector has seen steady growth in the second and third waves. As a result, established residential real estate agents are expected to see 30-35% growth this fiscal year, compared to 14% last fiscal year. For the next fiscal year, we expect 10-15% growth,” said Anand Kulkarni, Director of Crisil Ratings.

The housing sector has seen a lower impact and a shorter period of disruption with each passing wave – with sales at 70-75% of pre-pandemic levels in the second wave compared to 50-55% in the first and a recovery in one quarter against two quarters during the previous one.

Home sales prices in all six cities are expected to rise slightly in the near future as real estate agents pass on the impact of rising labor and material costs and supply and supply dynamics. demand will improve. Inventory levels in these cities have fallen to 2.5 years from more than 3.5 years in March 2019. The ability of real estate agents to force price increases will vary, however, depending on brand strength and the resulting demand, Crisil said.

The pandemic has amplified the performance difference of established, financially cautious developers compared to their leveraged counterparts.

Despite a down cycle in recent years, established real estate agents delivered projects on time. They have also deleveraged over the five years to 2022 by raising equity and monetizing business assets and land values. 50,000 crore.

“Established real estate agents have strengthened their credit profiles. The debt-to-total-asset ratio of these realtors is expected to drop from 45% five years ago to 25% by March 2022. Significant opportunities through joint ventures and joint development will help these realtors achieve healthy growth without compromising their credit risk profiles,” said Kshitij Jain, Managing Partner, Crisil Ratings.

Some mid-sized developers, who have historically maintained low leverage, are also well positioned in the current scenario. However, leveraged developers will continue to lose market share as they are crippled by a debt-to-total-asset ratio above 50%, low liquidity, and limited ability to raise equity or monetize trading assets. However, these real estate agents may choose to enter into partnerships with their established counterparts for the development of projects.

The ability of property developers to maintain a lean capital structure to weather future down cycles will remain important, and any aggressive debt-financed growth will bear watching, the rating agency said.

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