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real estate | IST

With realty sales back on track, developers want to hike prices

With the festive season around the corner, developers want to hike prices, owing to greater demand and margin pressures.

Real estate stocks have had a dream run in the last six months, with names like Brigade, Puravankara, Lodha and Sobha clocking some stellar gains. However, that isn’t surprising given the sales numbers from the sector.
According to Knight Frank data, one lakh homes have been sold between January and June of 2021. With the festive season around the corner, the Indian real estate sector is looking forward to cementing its bounce-back from the doldrums of 2020. Developers want to kick-start this process by hiking prices, owing to greater demand and margin pressures.
"In the affordable segment, prices are definitely going to go up simply because the cost of raw materials has gone up," says Niranjan Hiranandani, national president, NAREDCO. "As far as the higher segment is concerned, because the stock has come down, the prices will go up there as well," he adds, "Logically, it appears that as of now, prices will go up between 5 and 15 percent in the next 12 to 24 months."
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The foundation of this optimism is the sales numbers seen in the first quarter of this fiscal year. Despite talk of a second and third wave, Puravankara has recorded a whopping 1,024 percent rise in net profits, to Rs 155 crore, helped along by a 184 percent jump in sales. Sobha, meanwhile, has reported a 71 percent rise in net profit to Rs 11.4 crore, and DLF's Rs 337-crore net profit is a sharp contrast from the Rs 71-crore loss it posted a year ago.
With construction activity picking up on the back of labour returning to sites, new launches are also back on the anvil. "We have planned launches — about 14 million square feet. This is a mix of plotted developments, affordable housing and premium-luxury housing," says Abhishek Kapoor, CEO, Puravankara, "About 7 million — that’s 50 percent — of our new launches is in ‘Provident’, our affordable housing brand."
Puravankara isn’t the only developer hitting the 'launch' button. Knight Frank has reported that the first six months of this year have already seen 1.03 lakh new launches, which is a 71 percent rise year-on-year. Another report by Anarock predicts that 2023 could see 2.62 lakh homes hitting the market — a seven-year high — and 3.17 lakh homes getting sold.
These numbers, however, still leaves 4.42 lakh homes in unsold inventory. Developers aren’t too worried and don’t intend to dial down on launches. "We see that demand is picking up in the markets we operate, and therefore we do not think that larger players — those that have a good track record — need to slow down their launches," says Rajendra Joshi, CEO (Residential) at Brigade.
What may play spoilsport to these plans, however, is real estate policy. For instance, the Maharashtra government has steadfastly shied away from continuing its stamp duty rebate of 3 percent, which led to a boom in home sales till March, while the NCR administration is actively mulling increasing guideline values in Noida, Greater Noida and along the Yamuna Expressway, which could add to a buyer’s stamp duty burden. These decisions notwithstanding, Indian real estate could continue its dream run at least for the next 12 months.