Notwithstanding the ongoing liquidity crunch and other disruptions, several big realty companies, listed and private, have reported strong sales growth in the fourth quarter of the last fiscal year (2018-19), mainly on the back of price rationalisation.

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“Underpinned by an increase in deliveries, the area sold during FY19 by the companies, comprising ten large listed entities, stood at a robust 32.19 million square feet (mn sq ft), registering a 44% growth over the previous year,” an Icra report said.

“This sales velocity reflects the highest level achieved over the past five years, with strong sales of 10.99 mn sq ft having been registered in Q4FY19 alone. Sales levels in Q3 FY19 were also robust. Collections also remained high, standing at Rs 16,814 crore during 2018-19, recording a growth of 13% over 2017-18. In order to capitalise on healthy sales momentum, large listed players have increased the pace of project launches as well, with the same standing at a high 34.32 mn sq ft during FY19, depicting a robust 62% growth as compared to the previous year,” Icra’s study on top ten players concluded.

For example, total income  of India’s largest real estate player by market value DLF Ltd jumped 44% to Rs 2,661 crore during Q4 FY19 as against Rs 1,845.92 crore in the corresponding period of the previous year. The net profit went up 79% to Rs 435 crore during the quarter.

Similarly, Oberoi Realty’s residential sales also grew by 66%. However, the average square feet price of the realtor’s apartments have either marginally increased or fallen a few notches.

According to Pankaj Kapoor, managing director, Liases Foras, the higher sales momentum isn’t because of homebuyers becoming more brand conscious and Rera, but because of rationalisation in apartment prices undertaken by the larger players.

“Earlier, bigger players were commanding premium. Now, they do not want to hold on to the inventory and are selling at a discounted price,” said Kapoor.

Realtors sitting on a huge debt pile has prompted them to cut apartment prices, resulting in improved sales. This has helped them service these loans at a time when the economy is facing liquidity crunch due to a crisis in non-banking finance companies.

“Therefore, there are forces that are forcing the larger developers and their sales momentum further needs to improve by 2X or 3X, barring a few top players like Godrej Properties and Sobha,” Kapoor said.

CARE Ratings analysis on the sector showed that real estate’s net sales and net profit have increased each by 20% year-on-year in Q4 FY2019. “Bank credit offtake by the sector has also increased by 8.9% as on March 2019 compared with the 0.1% growth as on March 2018 indicative of pick up in the activity in this segment. The industry has been benefitted by the improvement in rental yields in commercial real estate and increased sale in low-ticket and affordable housing segment. A low base in the previous year too has helped on account of Rera and GST implementation,” read CARE Rating’s report on corporate performance.

Even Icra has agreed with Kapoor’s point on rationalisation of property prices, “In addition to the ramp-up in deliveries, sales momentum for the major listed developers has also been supported by a downtrend in the average sales price, driven by increasing developer focus on affordability.”