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Real estate sector enjoying festive run, experts bullish on realty index

Real estate sector enjoying festive run, experts bullish on realty index

Real estate sector enjoying festive run, experts bullish on realty index
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By Timsy Jaipuria  Oct 20, 2022 9:08:05 PM IST (Published)

Homes are back with a bang as an asset class as Diwali waits round the corner in all its post-pandemic glory. CNBC-TV18 spoke to a both real estate developers and market experts to understand how the festive quarter is turning out for the sector.

This Diwali, real estate companies are bullish on healthy sales — a trend which started from Navratri — in terms of enquiries turning into actual deals. As a ripple effect, the realty index too is looking for a robust run in the near future.

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CNBC-TV18 got a sense from developers and analysts on how this festival season is turning out for the real estate sector.

According to property search portal conglomerate Housing.com-Makaan.com-Proptiger.com, "Housing sales are generally higher during October-December when compared with the previous two quarters of the year because of the festive season and that lays the foundation for the January to March quarter, which is usually the best for residential real estate sales. This year again, sales during October to December are expected to remain buoyant despite the hike in interest rates on home loans and increase in property prices.”

“We believe that despite the hikes, home loan rates are still in a comfortable zone and developers are also expected to announce various festive offers to attract customers. Some builders have already announced interest subsidies for a certain period of time. Discounts in the form of cash-back, gold and other consumer durable products are also being offered. We are organising our annual festive season sale on the Housing.com platform and we are very confident that the sales momentum, which picked up after the second wave of the COVID pandemic, would continue during the last quarter of the 2022 calendar year. Consumer aspiration to own a home has only grown during the pandemic and this will drive growth in the residential segment in the coming years,” said Dhruv Agarwala, Group CEO, Housing.com-Makaan.com-Proptiger.com.

But, is this trend actually visible at the end of developers? That appears to be the case.

“The festive quarter seems to be extremely good for the real estate developers. Irrespective of the change in the repo rate by RBI, the sentiments of customers, investors in the residential sector are only becoming more aggressive. Certainly, there is a spike in the customers’ demand for the luxury residential segment falling under Rs 5-crore budget. Gurugram, in particular, is attracting more young millennials and startups due to the growing highway-and-expressway network. The festive season has only brought more energy to the sales, and as a real estate developer, we are confident that this momentum will continue further. Our recently launched ‘M3M Capital’ residential project in Sector 113, Gurugram has also been receiving tremendous response and has recorded Rs 1200 crore sales during Navratri itself,” said Pankaj Bansal, Director, M3M India.

Not just M3M, other developers too are looking at similar trends. Dhaval Ajmera, Director at Ajmera Realty Infra Ltd, told CNBCTV18, “Post-COVID, people have realised the value of real estate as an asset class, leading to a significant rise in demand for residential and commercial properties. The need for that extra living space, all-inclusive amenities and advanced infrastructure have influenced people to upgrade their homes. On the commercial property front, top corporates are back in the office and are re-hiring at a tremendous rate, driving the need for commercial real estate. As a result, there is a rise in the number of people buying homes and commercial real estate — largely due to the easing of the pandemic-induced pent-up demand.”

Ram Raheja, Managing Director of S Raheja Realty, too felt that pockets like Mumbai and western suburbs locations like the Khar-Bandra-Santacruz belt have been seen as preferred locations for those looking to invest in residential projects. People are looking to upgrade their living spaces as they continue to inquire about larger homes, so from 3-4 bedroom apartments to penthouses and ‘Jodi flats’ (two flats combined to make one) are in demand.

“Customers are also evaluating buying Jodi flats to accommodate parents, while also having arrangements for work-from-home. Prospective homebuyers will use this seasonal duration as an opportunity to seek out more of these amenities in prime locations across cities. Developers are providing technological advancements, extravagant condos, and luxurious lifestyles as they are on a selling binge in the districts, keeping record deals and leaving a peculiar imprint on the real estate sector,” Raheja said.

“With rising demand, the luxury housing sector in India hopes to see an upswing across tier I and II cities by the fiscal. The recent report states that the luxury market has recorded an 18 percent rise YOY, hence the strong demand and positive sentiment will be throughout the occasion. Developers are embracing the changing needs and mindsets of buyers and are working towards customising their projects,” he added.

Echoing those sentiments, R.K. Arora, Chairman of Supertech group, recently in the news for all the wrong reasons added that his company is looking to deliver 1,700 units in its different projects.

Prestige Estates too recently announced its update on operational performance for the quarter ending September 30, 2022. During Q2 FY23, the group registered sales of Rs 3,511 crore (up by 66 percent YOY) and collections of Rs 2,602.9 crore (up by 68 percent YOY).

The sales during this period are attributed to 4.55 million sq ft with an average realisation of Rs 7,711/sq ft. In the first half of the year FY23, the group registered sales of Rs 6,523.1 crore (up by 129 percent YOY) and collections of Rs 4,749.3 crore (up by 85 percent YOY). The sales during this period is attributed to 8.18 million sq ft volume with an average realisation of Rs 7,976/sq ft.

During the quarter Q2 FY23, five projects were launched spanning 7.39 million sq ft — The Prestige City Meridian Park- Phase-III and Prestige Park Drive- Phase-III in Bengaluru; Prestige Orchards in Hyderabad; and Prestige Liberty Towers and The Prestige City Mulund- Bellanza Phase-II in Mumbai. Three projects totalling 2.58 million sq ft — Prestige Park Drive – Phase I&II, Prestige Minsk Square and Forum Falcon City in Bengaluru — were completed during the quarter. During the first half of the year, H1 FY23 the new launches totalled 17.06 million sq ft and completions 3.35 million sq ft, respectively.

The company expects festival season sales to be robust.

When it came to the impact these ground reports will have on the realty index, experts felt that it would definitely reflect in the stock markets as well.

Abhishek Jain, Head of Research, Arihant Capital said, “We are in a structurally bull cycle for realty, however, due to higher interest rates and commodity prices there is a small hiccup to the long-term bull cycle. However, a heavy Q2 base impact will appear as new sales bookings in this quarter will be relatively weaker on a YOY basis.”

“The high interest rates may taper down, but some funds have gone underweight in the realty sector or booked profits, which have led to consolidation. As we can already see, Godrej Properties is down 50 percent from its highs, and DLF is down 20 percent from its highs. In the short term, this consolidation may continue. However, in a long-term basis, the demand is very strong. In the next 3-4 years, the rally may continue even though the growth rate may taper down. We are positive on the realty index. Realty companies are likely to do better as they have a strong order book,” he added.

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