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Despite Covid woes, residential launches back on track

Last updated on: August 18, 2020 18:02 IST

Despite a 56 per cent fall in residential launches in the first half of the year compared to the second half of 2019, Anarock Property Consultants believes that consolidation in residential real estate is expected to gain ground, and that branded players may garner a market share of 75-80 per cent.

In signs of green shoots in the real estate sector, several developers have lined up launches in the coming quarters, with consumer sentiment improving and construction activities getting back to normal.

Bengaluru-based Prestige Estates, which had put all its launches on hold after the Covid-19 outbreak, plans to start seven residential projects across south India during the second and third quarters.

 

With these projects, the company is targeting to get back to the pre-Covid quarterly level of over Rs 1,000 crore of gross bookings and collections from the second quarter of 2020-21 onwards.

“Sales numbers in the second quarter will definitely be more than double of the previous quarter,” said Irfan Razack, chairman and managing director (MD) of Prestige Estates, during an investors’ call.

“The company’s focus on affordable/mid-income housing projects in south India and an expected recovery in the hotel business in FY22 will enable the company to get its growth story back on track,” according to an ICICI Securities estimate.

Another Bengaluru-based real estate player, Puravankara, has lined up 11 projects in FY21 with an investment of around Rs 3,000 crore.

Of these, three were launched recently.

“Our recent project launches garnered good traction not only in terms of enquiries, but also in bookings. While there is an uptick in demand, customers are now looking at projects that fulfil their post-Covid needs,” said Ashish R Puravankara, MD, Puravankara.

The new launches also mark the company’s re-entry into the Mumbai market.

Despite a 56 per cent fall in residential launches in the first half of the year compared to the second half of 2019, Anarock Property Consultants believes that consolidation in residential real estate is expected to gain ground, and that branded players may garner a market share of 75-80 per cent.

Sales declined by 49 per cent during the period.

Brigade Group, which had deferred a couple of its residential projects, is also planning to launch them in the second and third quarters.

Total investment in these projects, located in Hyderabad and Bengaluru, will be over Rs 1,000 crore.

"We believe that demand for residential projects by bigger brands like Brigade will continue to be there even in these difficult times.

"Therefore, we will continue to launch new projects after a proper market assessment,” said Rajendra Joshi, CEO, residential business at Brigade Group.

Some players, however, continue to be cautious.

“We will launch new projects, but before that we are waiting and watching how this pandemic pans out.

"Demand is slowly coming to pre-Covid days,” said a Sobha spokesperson.

The company’s upcoming residential projects are located across nine cities, with a total built-up area of 14.36 million square feet.

In Mumbai, developers such as Oberoi Realty are banking on Diwali to launch projects. Godrej Properties, which has 15 million sq ft of launches planned in FY21, is waiting for approvals.

"As long as regulatory approvals are received in time, we will go ahead with our planned launches.

"We will, of course, have to be agile and tweak our strategy if needed after gauging the market environment,” said Pirojsha Godrej in a recent interview with Business Standard.

Gaurav Kumar, managing director, capital markets and residential business, CBRE India, believes that the pent-up demand of the last six months, a reduction in interest rates of home loans, the availability of completed units, and the ‘work-from-home’ imperative are expected to contribute to a strong recovery in the second half of 2020.

“We are already seeing signs of a revival with sales in the mid-market segment picking up across all metro cities,” Kumar said.

However, Amit Bhagat, managing director of fund management company ASK Property Investment Advisors, asks developers to be cautious.

"It is advisable for developers to plan launches for affordable and mid-segment housing in H2 of 2020-21 since demand will gradually come back.

"It will be prudent to do a financial closure with tied up construction finance to avoid overdependence on cash flow from pre sales,” Bhagat said.

Photograph: Reuters

Samreen Ahmad & Raghavendra Kamath in Bengaluru/Mumbai
Source: source image