Realty stocks have been on a tear lately as companies have seen huge demand for homes in the run-up to the festive season. Realty major DLF has seen its highest sales in the super-luxury segment in Q2 of FY 22. While also recording the highest collections in cash flow in the last five years as COVID- pressures ease.
The real estate sector has seen three downturns but is this real estate revival now sustainable? To talk about this in more CNBC-TV18 caught up with Ashok Tyagi, CEO & Whole-time Director, DLF.
Ever since the ending of the first lockdown, which is October last year, the sales cycle has bounced back and has come back very strongly across the board. For the first quarter, the industry was willing to write it off as pent-up demand, etc. but demand has sustained and strengthened and it is no longer just at the lower end of the product segment but has moved to luxury as well as the super-luxury segment.
According to Tyagi, demand has moved across the geographies that they operate in. So not only in Gurugram, which has seen buoyant sales but even in geographies like Indore, Lucknow, and Chandigarh where we had slow-moving inventory for a long time. That inventory has begun to move and has found new legs, he added.
So the demand recovery has been far more widespread recovery than was the case during the pandemic and even before the pandemic, said Tyagi.
When asked about the impact of higher raw material costs on business and the outlook, he said, they were selling two segments of products -- one was the complete inventory where much of the construction had already happened and so the impact of the raw material price escalation had no impact.
With regards to the series of new launches that we and the industry have done, some of the prices of the raw material have shot through the roof but those just have to be priced in both in terms of what additional pricing, you can pass on to the customer and two, what additional costs you can take.
Commodity inflation does look like it is here to stay, as does labour inflation. So, the industry would just have to weave those in as we move forward because that is the reality, said Tyagi, adding that the good news is that the financing costs for home buying are the historical low and so there is a huge demand upsurge that is driving and this should hopefully, eventually even out.
“Pricing by itself of the finished products of at least the credible developers has seen buoyancy. We ourselves launched our independent floors in Gurugram in November of last year, at a price point of about Rs 11,000 a square foot and our current editions have been launched at almost Rs 16,000 a square foot, and the pace of demand absorption continues to be as strong,” he said.
He further said, so far the demand buoyancy is ensuring that the prices are recovering and recovering well.
Meanwhile, Knight Frank in its report states that Mumbai city recorded 1441 stamp duty registrations, in the first week of November. In the month of October, 8576 transactions were recorded, which was the best October in 10 years. The report also states that if we November is as good as October, then we would do sale of one lakh units in Mumbai.
Talking about the demand outlook in the super luxury and mid-range segment, Tyagi said, for The Camellias last quarter we sold 34 units, and each unit is priced between Rs 25 to 30 crores. So almost Rs 900 crores plus sales came only from The Camellia's last quarter.
According to him, the increased conversion of buying decisions is changing across the segment. The independent floors is the segment priced between Rs 4-5 crores in main Gurugram and about Rs 2 crores in the father sectors of Gurugram and both are flying well. On the lower end, in locations likes Indore and Lucknow things are moving.
“So clearly super luxury is doing extremely well but so are the midrange products,” he said.
For the entire discussion, watch the video