While the prevailing liquidity crunch coupled with subdued demand and inventory overhang has kept the overall performance of the Indian residential real estate segment muted, large listed players continue to register robust sales. Reason: They are realigning their strategies to meet market demand.

For instance, sales of housing units under ₹1 crore have witnessed considerable momentum, a trend being acknowledged by a number of developers. Various government initiatives focussed on budget housing has further provided an impetus to this market trend.

“In response, existing phases/new launches [of housing units] are being reconfigured/designed with a focus on lower unit prices,” says a recent report by rating agency ICRA. “Recent launches have largely been concentrated in the 1,200-1,500 per square feet range, with an average price of around ₹7,000 per sq. ft., keeping ticket sizes within the ₹1-crore bracket,” the report adds.

Given their balance sheet strength, along with operational and financial flexibility, large developers have been in a better position to carry out this realignment. In the third quarter of the current financial year, the country’s 10 large listed developers sold 8.57 million sq. ft. of space. The sales value of the area booked increased to ₹5,980 crore in the period under review compared to ₹5,492 crore over the same period a year ago, registering a growth of 9%.

“This right-sizing and right-pricing has further strengthened the already ongoing market consolidation, which has been attributable to home-buyer preferences for products from established developers with a track record of delivery,” says Mahi Agarwal, assistant vice president and associate head at ICRA. “Consequently, the larger listed players have witnessed robustness in sales, followed by a corresponding reduction in unsold inventory.”

While overall homebuyer sentiment and demand is expected to remain muted, the ICAR report says reputed developers with “good quality completed inventory at affordable ticket sizes” will continue to witness positive sales momentum.

“On the supply side, the creation of the ₹25,000 crore last mile fund and recent RBI (Reserve Bank of India) announcements with regards to extension in DCCO (date of commencement of commercial operations) are expected to boost project deliveries. On the demand side as well, the reduction in requirement to maintain cash reserve ratio by the banks is expected to provide a boost to the home loan availability and might impact the demand positively,” adds Agarwal. However, the ability of developers to continue to move in alignment with market requirements and capitalise on the government’s stimulus measures will remain critical for maintaining the current sales momentum.

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