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Real estate pre-sales to show robust growth in FY24: Motilal Oswal report

Pre-sales provide visibility to the company's future cash flows and collections and act as critical inputs for developers to strategise and time their new product launches

Real estate

Aneeka Chatterjee Bengaluru
Real estate pre-sales in India are estimated to grow by 30 per cent year-on-year (Y-o-Y) in 2023-24 (FY24), driven by sustenance sales as launches were subdued for most companies, according to a Motilal Oswal report.

‘Sustenance sales’ refer to brisk sales of residual inventory from existing projects.

Twelve listed real estate companies registered their second-best quarter ever, with cumulative pre-sales of Rs 252 billion, up 54 per cent Y-o-Y and 44 per cent quarter-on-quarter.

Ongoing projects contributed 56 per cent to total pre-sales in the first half (H1) of FY24. At the same time, new launches reported a 60 per cent absorption, contributing to 44 per cent of pre-sales, according to Motilal Oswal.

Typically, ‘pre-sales’ is a term used by developers to indicate that a certain amount of inventory has been booked in a given period, but only a part of the payment has been received.

Pre-sales provide visibility to the company’s future cash flows and collections and act as critical inputs for developers to strategise and time their new product launches.

With inventory for the listed universe under Motilal Oswal now down to 10 months, launches are expected to double in the second half of FY24 to 60 million square feet (msf) in value terms, and launches would catapult to Rs 820 billion from Rs 260 billion during the same period.


“Hence, we expect our coverage universe to deliver 30 per cent Y-o-Y growth in pre-sales in FY24 versus an initial growth guidance of 15-20 per cent,” the brokerage firm said.

Over 2019-20 through 2022-23, the listed players have outperformed industry growth in terms of bookings by 1.5 times, resulting in a consistent increase in their market share to 16 per cent from 12 per cent (this stood at 16.5 per cent at the end of H1FY24). During this period, sales across the top seven cities recorded a 22 per cent compound annual growth rate, with Delhi-National Capital Region, Pune, and Hyderabad witnessing a twofold jump in sales since the pandemic.

Most of the listed real estate players have a very strong launch pipeline targeting at least two new markets apart from their home market, which will lead to a further pick-up in market share of listed peers, said Motilal Oswal.

Since the rate hike cycle has peaked, it believes the residential real estate cycle is unlikely to face any major headwinds.

“The driving force has been mostly the economy, which is doing well, and almost every sector has been benefiting from this, including real estate. It’s a strong tailwind that the real estate sector is going through,” said Sumeet Chunkhare, chief marketing and communications officer, Sobha.

Puravankara Group recorded an exponential increase in pre-sales by 102 per cent Y-o-Y in the second quarter of FY24.

“Our strong brand product portfolio largely drove this. Moreover, the Indian realty sector is reflecting the resilience demonstrated by the broader economy in the face of significant challenges currently confronting the global economy. This is also indicated by declining inventory. The absorption is expected to remain buoyant in the quarters ahead, as this demand is predominantly influenced by end-users,” said Abhishek Kapoor, group chief executive officer (CEO), Puravankara.

Real estate consultancy Colliers said that fuelled by strong homebuyer sentiment and positive market fundamentals, the housing market across the top markets in India is on a strong growth trajectory.

“The trajectory in pre-sales indicates that demand is improving triggered by sentiment buoyancy. As the market was recovering from the lows of the pandemic, the initial support came in from several state governments that stepped in with a reduction in stamp duty, registration charges, etc. This helped the market to stay afloat. The streak continued in 2022 and 2023 as well,” said Vimal Nadar, senior director and head of research, Colliers India.

“Overall residential sales across price categories exceeded 230,000 units during January-September 2023, registering 5 per cent Y-o-Y growth of about 5 per cent. Sustained momentum in demand led developers to launch over 220,000 new housing units during the same period. It is estimated that both sales and new launches could reach a 10-year high in 2023 and may exceed the 300,000-unit mark,” said Anshuman Magazine, chairman and CEO-India, Southeast Asia, Middle East & Africa, CBRE.

However, unlike residential markets, commercial office markets play out differently, explains Colliers.

“Akin to pre-sales in the residential segment, Grade A office buildings witness pre-commitments before the building is completed and commissioned. Office leasing has picked up significantly and recorded a milestone of 50 msf in 2022,” said Nadar.

He added that some of the key markets of Pune and Hyderabad are currently recording healthy pre-commitments to 40-50 per cent and 30-40 per cent, respectively. This trend is only expected to improve, backed by expected strong growth in demand from across segments, including technology, e-commerce, fast-moving consumer goods, etc.

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First Published: Dec 04 2023 | 7:32 PM IST

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