Ind-Ra revises real estate sector's outlook to improving for FY22
Ind-Ra expects FY22 to see an increase in sales by 30% yoy. The recovery will likely be dominated by Grade I players, whose sales are likely to grow by 49% year-on-year in FY22 after a 14% year-on-year increase in FY21.
NEW DELHI: India Ratings and Research (Ind-Ra) has revised the sector outlook to improving for FY22, and divided the rating outlook as positive for the Grade I players, while maintaining a negative outlook for non-Grade I players during March 2021.
Ind-Ra expects FY22 to see an increase in sales by 30% year-on-year. The recovery will likely be dominated by Grade I players, whose sales are likely to grow by 49% year-on-year in FY22 after a 14% year-on-year increase in FY21.
Non-Grade I players are also likely to see their sales rising by 26% year-on-year in FY22 after a 39% year-on-year decline in FY21.
Market consolidation will continue in the favour of Grade-I players. While sales have declined overall during 9MFY21, for Grade-I residential players, sales have surpassed 9MFY20 levels showing a strong recovery from 1QFY21 levels. Pre-sales for the top 10 listed players in 9MFY21 stood at 23 million sq ft.
As per Liases Foras real estate market data for 3QFY21, while the COVID-19 related lockdown resulted in a rise of the unsold inventory levels to over 15 quarters at end-FY20, this increased to over 20 quarters at end-9MFY21, exacerbated by muted sales in 1Q and slower-than-expected recoveries in 2Q and 3Q.
Of the six key markets, Hyderabad (QTS of eight) and Pune (QTS of 12) had the least quarter to sell inventory while Chennai (QTS of 22) had the maximum unsold inventory, followed by National Capital Region (NCR) (QTS of 21) and Mumbai Metropolitan Region (MMR) (QTS of 19) in 9MFY21.
Residential sales were down 42% year-on-year to 118 million sf in 9MFY21 across the top six cities in India. National Capital Region and Bengaluru saw the maximum decline year-on-year in 9MFY21 (over 50%) due to the pandemic-led disruptions.
The residential sector continues to underperform as an asset class, impacting investor demand. Hyderabad remains the only market which has shown a price CAGR in a high single digit, while the other markets have lagged behind with sub-par price CAGR (-3% to 3%) over the past five years.
While MMR and NCR have witnessed a decline in prices since FYE20, all other cities, with the exception of Hyderabad, have witnessed subdued growth of prices (1%-3%) since FYE20.