Knight Frank Report: Sales Volume Of Listed Real Estate Companies On The Decline

The report by Knight Frank states that the sales volume of 25 listed real estate companies have almost halved from, 21.85 million sq ft., to 11.80 million sq.ft., which is almost 43% over the past eight quarters. The residential properties, collectively Bengaluru and Chennai city have witnessed the highest growth in their market share from 16% in Q4FY12 to 33% in Q4FY14. The north Indian based companies continue to dominate the Indian realty market in the sales volume but its shares continuously fell from 75% in Q4FY12 to 51% in the latest quarter. The residential property prices across major cities have witnessed a double digit growth rate during Q4FY12 to Q3FY14.

The report further states that the real estate demand in north plummet’s the maximum. The sales volume at northern India-based real estate companies which is represented by seven firms out of twenty-five firms has gone down the maximum to reach 57% on a YoY basis in Q3FY13. The residential prices in the region have increased by 21% during the last eight quarters. The revenues in this sector have increased by 18% in Q3FY14 to Rs 32.90 billion as compared to Rs 32.10 billion during the same quarter previous year.  The outlook for the sales volume remain dim, compelling developers to shift their targeted milestones by at least two to four quarters.

Unaffordable prices and execution risk brings sales down in western India, says the report. Western Indian based real estate companies are represented by thirteen companies in the set of twenty-five real estate companies. Western India companies show a decline of 36% during Q3FY14 when compared to Q3FY13. The average residential prices in the western region have increased by 16-17% during the last eight quarters. The operating profit margin fell down from 61% in Q3FY13 to 56% in the current quarter.

The southern real estate market is the most stable in comparison to other regions. Southern India is represented by five companies in the set of twenty-five real estate companies which booked sales to the tune of 3.92 million sq.ft in the current quarter as against 3.76 million sq.ft in Q3FY13 thereby registering a growth in 4%. Affordable prices, an end-user driven market and comparatively less leveraged balance sheets led to a relatively better performance by the developers based in south India. The change in price in this region grew by 10% in Chennai and 17% in Bengaluru during the past eight quarters.

Economic and political stability are the vital catalysts for revival of the real estate sector in India. In addition, revival of this sector also depends on the regional policies.