The residential real estate sector continues to scale new peaks-crossed the billion square feet sales mark in FY2024, clocking 20% yoy growth in sales at 1.1 bn sq. ft. Strong sales volume, coupled with healthy price improvement (11% yoy) and aggressive inventory liquidation (82 mn sq. ft in FY2024), has meant that inventory levels are down to just 15 months. Among listed players, Godrej, Prestige, Signature and Brigade delivered very strong growth in FY2024. Extant inventory is at multi-year lows and new launches are continuing to garner strong demand; we expect the sales momentum to continue unabated in FY2025E. We maintain our constructive stance-DLF, Signature Global and Brigade are offering attractive entry points.
Strong sales momentum, leading to continuous inventory liquidation
All-India residential sales rose to a lifetime high of 1.1 bn sq. ft (20% yoy) in FY2024, with average realization rising to Rs7,575/sq. ft (11% yoy). 4QFY24 also saw the highest ever quarterly sales of 295 mn sq. ft (17% yoy, 1% qoq), with average realization rising to Rs7,944/sq. ft (8% yoy, 4% qoq). Demand in 4QFY24 was led by MMR that saw sales of 54.9 mn sq. ft (33% yoy, 16% qoq), followed by Bengaluru at 28.6 mn sq. ft (21% yoy, 7% qoq) and Hyderabad 47.7 mn sq. ft (23% yoy, (-)10% qoq). The NCR market saw lower sales in 4QFY24 at 19.8 mn sq. ft ((-)22% yoy, (-)13% qoq), led by a decline in Gurgaon. Launches in 4QFY24 were a tad lower, but still healthy at 233 mn sq. ft ((-)9% yoy, (-)14% qoq). Momentum has sustained in April 2024, with sales of 99 mn sq. ft (29% yoy, (-)2% qoq), aided by launches of 64 mn sq. ft.
Overall, inventory across the country reduced to 1.37 bn sq. ft ((-)6% yoy, (-)4% qoq), as of March 2024, equivalent to 1.3 years of sales (trailing 12 months). Average realization growth of 8% yoy in 4QFY24 was led by Bengaluru at Rs8,507/sq. ft (24% yoy, 5% qoq). Other markets saw more modest increases-NCR at Rs12,653/sq. ft (13% yoy, (-)1% qoq) led by Noida, MMR at Rs12,684/sq. ft (4% yoy, 6% qoq) and Hyderabad at Rs7,922/sq. ft (4% yoy, 2% qoq).
Strong pre-sales growth for listed developers; stronger launch pipeline
Our coverage universe witnessed 4QFY24 pre-sales of Rs303 bn (22% yoy, 3% qoq), implying an all-India market share of 12.9%. FY2024 pre-sales rose to Rs987 bn (41% yoy). Godrej, Prestige, Signature and Brigade had the highest pre-sales growth, followed by Sobha and Lodha. For our coverage, a combined launch pipeline of 140 mn sq. ft (GDV of Rs1.7 tn) for FY2025E compared with 88 mn sq. ft in FY2024 is expected to support sales performance.
Stock rally reflects underlying business performance; we remain constructive
Valuations for most residential real estate stocks stand at 7-12X adjusted EV/EBITDA (FY2026E)-the higher end of their past trading range, reflecting the strong underlying business performance and changing investor interest.
Developers continue to guide for double-digit growth, aided by industry growth and market share gains. We remain constructive, owing to the strong operational performance by the players, and prefer DLF, Brigade and Signature Global. |
