The momentum in the country’s most expensive real estate market, Mumbai, is showing no signs of flagging. At 10,017, the number of registrations in February stood at 1.6x the past 5-year average of February and also the second best in the past 10 years (See: The maximum city).

According to Biplab Debbarma, analyst at Antique Stock Broking, while supply side dynamics continue to support the underlying consolidation in the sector driving the majority of launch pipelines contributed by grade A developers, demand side dynamics remain strong, driven by strong macros and improved affordability.

The upcycle in the real estate sector is also showing in the performance of listed players. For instance, Q3FY22 was the best-ever quarter in terms of aggregate pre-sales and collections. In fact, 9MFY22 pre-sales are already at FY21 levels, according to Mohit Agrawal, analyst at IIFL Securities.

Developers have also been able to take price hikes through the year, albeit modest. Mumbai remains the big driver, as Agrawal mentions that business development is being aggressively pursued, especially in the Mumbai region, even as leverage levels continue to ease. For instance, Macrotech Developers added launches worth ₹10,000 crore in Q3. Mahindra Lifespaces now ₹8,000 crore business development pipeline with recent purchase of Kandivali land from parent Mahindra & Mahindra.

In the third quarter of FY22, registrations (including primary and resale transactions) for Mumbai were 6% on a quarter-on-quarter basis, which is 37% above the long-term average. The current calendar year began on a strong note with January clocking over 8,000 registrations, which is 30% above the long-term average. For the state of Maharashtra as a whole, registrations in January were 13% above the long-term average.

What is also fuelling the recovery in the financial epicentre of the country is the consistent demand that is driving down inventory overhang to decadal lows. As per Debbarma, post the last real estate upcycle in CY11/12, consistently higher new launches and reduced demand kept driving inventory overhang in Mumbai (and across most markets) to higher levels.

However, since the onset of the pandemic, lower launches steadily drove the inventory overhang to lower levels of around 28 months, the lowest since CY12. At its peak, the inventory overhang had touched a high of 60 months in CY17.

“Our channel checks indicate that the demand continues to remain high and the healthy inventory levels coupled with returning back to normalcy is expected to drive the next leg of launches going ahead,” mentions Debbarma.

Analysts believe the consolidation will continue to play out and grade A developers will continue to drive the majority of the new launch pipeline with Macrotech Developers (Lodha Group), Oberoi Realty and Godrej Properties remaining the best placed to benefit from their well-entrenched presence in the Mumbai Metropolitan Region.

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