The country’s residential realty sector is witnessing a K-shaped recovery with large listed players recovering at a much better pace than smaller and unorganised players.

According to ICRA, while the broader market remained 24 per cent below pre-Covid-19 levels on a year-on-year (y-o-y) basis in Q3 FY2021 and 39 per cent below pre-Covid-19 levels in 9M FY2021, the top 10 listed realty players witnessed a 61 per cent y-o-y growth in Q3 FY2021 and 13 per cent growth in 9M FY2021.

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This disparity in sales growth rates has led to accelerated consolidation in the aftermath of Covid-19 and the market share of the top 10 listed realty players has nearly doubled in the current year, increasing from 11 per cent of sales in FY2020 to 19 per cent in 9M FY2021.

Larger developers have been benefiting from demand consolidation and better credit availability. In terms of launches, their market share has increased from 11 per cent in FY2020 to 22 per cent in 9M FY2021.

Shubham Jain, Senior Vice President and Group Head at ICRA, said, “For the broader market, Covid-19 triggered one of the worst demand crashes in recorded history, with housing sales volumes witnessing a y-o-y decline of 62 per cent during Q1 FY2021 across the top eight cities of the country. While the de-growth was limited to 24 per cent by Q3 FY2021, larger players recorded a much better recovery, registering y-o-y sales growth of 61 per cent in Q3 FY2021.”

The implementation of RERA and GST had already been supporting the market position of these larger players. A gradual unlocking of the economy and pent-up demand have been supporting housing sales. Moreover, the repo-linked lending rate for home loans has touched a historical low. This has resulted in improved affordability and has been stimulating house purchases, at least from larger, reputed developers with a strong track-record of timely project completion and quality construction.

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Overall operating cash flows for most developers, including the listed players, are expected to witness moderation in the current financial year, resulting in increased reliance on available liquidity and/or refinancing to meet committed outflows.

Jain said, “With smaller players making up around 80 per cent of the market, the adverse impact on those developers will weigh heavily on the sector as a whole. Timely liquidation of the high unsold inventory, particularly in oversupplied regions such as MMR and NCR, and adequacy of operating cash flows to meet debt obligations would be key lookout areas, with most of the smaller residential developers having built-up unsustainable debt levels on account of slow-moving inventory or high investment in land assets.”

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