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Explained: Why residential real estate sales hold momentum
Financial Express  |  December 7, 2018

Kotak Institutional Equities

Residential real estate sales in September 2018 held the momentum of preceding months with sales of 31.6 million sq. ft with declining launch activity (13.1 million sq. ft in September 2018) helping steadily absorb the legacy build-up of inventories. Sales trends were stronger in the top three cities. Real estate prices remain in a narrow range with all-India prices at Rs 5,381 per sq. ft. However, a 37% year-on-year (yoy) growth in sales for our coverage universe for 2QFY19 against 6% year-on-year growth for the industry reflects the continued impact of consolidation in a post-RERA regime.


Sales continue to exceed launches


All-India real estate sales across major cities clocked 31.6 million sq. ft in September 2018, against launches of 13.1 million sq. ft. We highlight that launches at 37.2 million sq. ft in 2QFY19 were significantly lower than 62.1 million sq. ft launched in 1QFY19 and 50.5 million sq. ft seen in 2QFY18. Consequently, inventory across India ped 10% y-o-y to 1.3 billion sq. ft from 1.4 billion sq. ft in September 2017, reflective of decreasing launch activity. Prices saw a slight increase in 2QFY19 averaging around Rs 5,400 per sq. ft (Rs 5,275 per sq. ft in 1QFY19).


National Capital Region (NCR): In continuance with trends seen previously, sales activity in NCR remained upbeat at 4.2 million sq. ft (+47% y-o-y) in September 2018. Across all metros, launches remained the lowest in Delhi NCR with only 1.6 million sq. ft released in September 2018 in peripheral regions of Noida and Greater Noida.


Mumbai Metropolitan Region (MMR): Launches in MMR showed a downward trajectory with 2.2 million sq. ft being launched in September 2018 (average monthly launches of 3.7 mn sq. ft in 1QFY19 and 5.9 mn sq. ft in September 2017). Launch activity during the month was more pre-dominant in Thane.


Sales, however, remained upbeat with 6 million sq. ft (+7% y-o-y) residential area being sold during September 2018, contributed by both Mumbai (2.2 million sq. ft) and Thane (2.9 million sq. ft).


Edited extracts from Kotak Institutional Equities Research report