Actual property is but to search out its ft

Lately, this parameter has been soft. At a pan-India level, the momentum of realty launches was subdued in January. In India’s top seven cities, aggregate launches were 6% lower in January month-on-month, and 33% lower year-on-year, said Nuvama Research in a report citing data from PropEquity.

In absolute terms, month-on-month, Hyderabad saw the highest drop in launches, followed by Pune, Kolkata, Bengaluru and Mumbai Metropolitan Region. On the other hand, the National Capital Region saw a sharp jump in new launches in January, followed by Chennai.

“Launches were slower sequentially in Q3. However, on 9MFY23 basis, among the companies under our coverage (Lodha, DLF, Brigade Enterprises, Sobha, Godrej Properties), launches at 24.3 million square feet (msf) stacks up well against full year FY22 at 27 msf,” said Mohit Agrawal, analyst, IIFL Securities Ltd.

Some launches have been delayed due to approval issues, and there is still some ground left to cover before the year ends, so the pace of launches may pick up in February-March, he said.

It should be noted that Q4 is a seasonally strong quarter for the sector. And there are a slew of launches scheduled for current quarter by many listed real estate firms across various locations.

Recently, DLF Ltd launched its new luxury project in Gurgaon. Oberoi Realty Ltd’s Thane project (Kolshet Road) is also scheduled for launch in Q4. Macrotech Developers Ltd (Lodha) has launches slated for Mumbai and Pune. Prestige Estates and Projects Ltd is also bracing for launches in its key market of Bengaluru and Hyderabad in this quarter.

What’s more, the pace of new launches will depend on inventory at-hand for all developers. “In our recent channel check, we noticed that inventory levels in select metros have seen a marginal uptick, after many months of a downward trend,” said Vivek Rathi, director research, at property consultancy Knight Frank India. While this is not concerning yet, given the potential headwinds from rising home loan rates, developers may be waiting to exhaust existing inventory before committing to new launches, said Rathi.

This approach is not entirely surprising because as systemic lending rates continue to move northward, the cost of borrowing for developers is also inching up. For now, “Healthy demand is leading to improving profitability for realty developers (about 35% cash operating surplus during 9MFY23 compared with 31% in FY22),” Nuvama’s analysts said in another report.

But investors in real estate stocks are in a sombre mood. Rising interest rate is a dampener because borrowing costs increase, and this is a potential downside risk to demand for housing. Mirroring this concern, in CY23, so far, the Nifty Realty index is down by nearly 12%. While it is difficult to gauge how much further correction realty stocks can see, a meaningful upside is unlikely in the short run, at least, unless the spectre of interest rate hikes is completely out of the way.

Note that so far in this financial year, developers have taken moderate price hikes in select categories, which have managed to get absorbed. However, if prices are raised further, it could weigh on the buyers’ sentiment.