Established Residential Realtors Set For 30-35% Sales Growth: CRISIL

Established residential realtors sold Rs 34,000 crore of inventory in the first nine months of this fiscal - equal to sales in the whole of last fiscal - reflecting a significant recovery in the housing market, CRISIL has stated.

"Improved affordability and preference for larger homes owing to a surge in remote working driven by the Covid-19 pandemic have fuelled this boom.

As a result, the market share of these 11 listed players in India's six cities has risen to 20-22% currently from 14-16% before Covid-19 struck.

Besides strong residential sales, equity raising, and asset and land monetisation have helped these players navigate the pandemic and strengthen credit profiles," CRISIL has noted.

Says Anand Kulkarni, Director, CRISIL Ratings, "Increased affordability due to low interest rates and flattish capital values, rising demand for bigger homes, and government measures in the past two fiscals have provided a fillip to residential realty. After the setback in the first half of last fiscal due to the first wave, the sector has grown steadily through the second and third waves. Hence, established residential realtors are likely to see 30-35% growth this fiscal versus 14% last fiscal. For the next fiscal, we see growth at 10-15%."

To be sure, the sector has seen lower impact and a shorter disruption period with each passing wave - with sales at 70-75% of the pre-pandemic level during the second wave compared with 50-55% during the first and recovery at one quarter as against two quarters during the preceding one - underlining the sector's resilience.

That said, the pandemic has amplified the difference in the performance of established and financially prudent developers versus their leveraged counterparts. Despite a downcycle in the past few fiscals, established realtors have delivered projects on time. They have also deleveraged in the five fiscals through 2022 by raising equity and monetising commercial assets and land worth ~Rs 50,000 crore.

Says Kshitij Jain, Associate Director, CRISIL Ratings, "The established realtors have strengthened their credit profiles. The debt to total assets ratio of these realtors is expected to improve to ~25% by March 2022 from ~45% five years ago. Significant opportunities through joint ventures and joint development will help these realtors log healthy growth without compromising on their credit risk profiles."