Real Estate - Strong Demand For Residential Sustaining At Underlying Pricing: Dolat Capital

Dolat Capital Report

We take note of the following key trends for tier-I cities in Q1 FY24 –

1. Pricing growth (up 11% YoY; +2% QoQ) is backed by strong underlying demand with unit sales up 13% / 14% / 45% versus YoY / two year average /pre-Covid respectively. Notably National Capital Region and Bengaluru witnessed the highest QoQ increase in average pricing.

2. Supply is lagging demand with new launches at less than 85% of total absorption on a four quarter rolling basis. This is driving inventory overhang down by one month QoQ and six month YoY. Noida remains a clear outlier with new supply gap of ~75%.

3. Share of luxury segment is on the rise with absorption share increasing 1% QoQ and 5% YoY. Notably ~70% of new business development by listed players is catering to the luxury / high value offering. Also, demand for products commanding an ATS of more than Rs 100 million is running strong (up 54% YoY / stable QoQ / three times pre-Covid); allaying slowdown concerns on account of introduction of reinvestment cap of Rs 100 million in residential properties from LT capital gains.

Additionally, our analysis of key land transactions (~1700 acres) in CY23 pins the share of listed and large unlisted organised players at 77% versus their absorption and supply (in units) market share for FY23 / year-to-date ‘FY24 at 17% / 16% and 18% / 17% respectively; underpinning the sector consolidation theme.

Reiterate 'Buy' on Oberoi Realty Ltd., DLF Ltd., Prestige Estate Projects Ltd. and Sobha Ltd.

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