Residential real estate cycle is intact and is riding strong: Emkay Global


Emkay Global Financial Services has released a report on the real estate sector. The report states, the recent quarterly sales updates and the performance of select new projects by top developers reaffirm Emkay’s view that the residential real estate cycle is intact and is riding strong. There is clear evidence of broad-based demand existing across segments and project life cycles for the right product in the right market.

Some of the key projects worth highlighting are:

1) Oberoi – Elysian, Sky City Borivali and now the late-cycle Mulund projects also gaining momentum, driving overall sales in 3QFY22 >2x YoY/QoQ

2) Macrotech – robust traction intact across portfolios, i.e. ready inventory sales in South/Central Mumbai and performance of new launches in mid-income to luxury projects in Thane/Kandivali

3) DLF likely retaining its strong sales momentum in its uber-luxury project Camellias – we estimate 20 units sold in 3QFY22

4) Prestige Bengaluru Sept’21/Oct’21 launches witnessing >50% sales-to-launch ratio

5) Sunteck’s affordable segment Vasind launch likely >70% sold out.

Elsewhere, Birla Estate’s Worli project has garnered a very strong response with >50% EOI for the units launched as per market survey/channel checks. More importantly, the solid sales print by Mumbai developers underpins strong underlying demand even in the absence of any sops, i.e. stamp duty cuts.

Additionally, Emkay notes that the launch cycle is yet to take off, with new launches in CY21 (as of Nov ’21) for Tier 1 cities running at ~75% of total absorption, MMR at 70%, Bengaluru at 64%, and NCR at 80%. Notably, the share of listed developers in terms of overall absorption is growing but remains low (~10% Pan India), implying a sizeable market share opportunity. With the launch cycle gaining momentum, the research firm expects a stronger sales trajectory ahead. Emkay Global reiterates a positive stance on the real estate sector. Their top picks are DLF, Macrotech and Sunteck.


Operational updates on Macrotech: The key positive was the strong traction in JDA formalization, providing evidence of attractive opportunities available to large organized players, given that most of the JDAs are likely coming with 65-70% economic share. The developer signed 4.8msf of JDAs amounting to a GDV of Rs 10,000 cr in 3QFY22, driving overall JDAs to 11 projects with a cumulative GDV of Rs 14,500 cr. Notably, the average price of JDA signed during the quarter is nearly 2x at Rs 21,000/sf vs. the JDA entered in H1, implying a mix of JDAs signed in South Central and Western suburbs of Mumbai. Overall sales increased 30% QoQ and 40% YoY.

Oberoi Realty posted stellar sales in 3Q at Rs 2,000 cr, >2x QoQ/YoY. The breakup is unknown but we expect Elysian (Goregaon) leading the charge with the total sales-to-launch ratio likely to be at ~60%. Emkay expects an increased contribution from Mulund as it is near the completion stage. On its ultra-luxury project (360 west), the channel check suggests 1 unit sold in 3Q. Emkay expect an upside risk to the full-year sales forecast with 9MFY22 sales at Rs 3,000 cr.