Three Key Stand out Markets NCR, Mumbai & Hyderabad

Emkay Research analysing real estate project launch data across Tier 1 cities over the last two years (as of Oct ’21) enlists 4 stock recommendations in the real estate sector. Pan-India launches in units (annualized) are running flat YoY and 22% below 2019 levels. Three key stand out markets are NCR, Mumbai and Hyderabad registering 15%- 20% increase in launches (annualized) over 2019. Top markets within the Tier 1 cities that lagged vs. 2019 levels are Kolkata (-74%), Navi Mumbai (-42%), Bengaluru (-31%), Chennai (-24%) and Thane (-24%). The share of listed developers is inching higher to 10% on a pan-India basis in CY21; up 200bps YoY. Bangalore, Noida and Mumbai witnessed notable increase with the share of listed developers rising to 34%, 34% and 9% respectively. On the other hand, Gurugram witnessed a decline in overall share of listed players declining to 16% vs. 33%. However, Emkay see a scope for material improvement in Gurugram, with DLF likely to be the key beneficiary given its sizeable land holdings. Top 5 micro markets share ranges between 23% and 47%% across Tier 1 cities (ex-NCR). Amongst the Tier 1 cities Pune remains the most diversified with share of launches in top 5 micro markets accounting for 23% between April ’20 and Oct ’21. This is followed by Hyderabad at 31%, Mumbai at 32% and Bangalore at 35%. NCR remains a market with most concentrated supply with Top 5 micro markets of Gurugram accounting for 62% of overall launches while majority (>50%) of Noida’s supply is concentrated in Sector 150. 2-BHK configuration remain in dominance but 3-BHKs gaining traction. On a Pan India basis, share of 3-BHK increased to 35% (YTD ‘FY22) vs. 31% / 27% in FY21 / FY19 respectively. This compares with Tier 1 cities at 30%; up 300bps / 700bps vs. FY21 / FY19 respectively. Two key factors driving this trend includes WFH / hybrid office culture and High affordability measured in terms of EMI / Household income. Nonetheless, 2-BHK command a lion’s share of 40%+ in overall mix followed by 1-BHK at 20% / 25% for Pan India/Tier 1 cities respectively as of YTD ‘FY22. Notable launch performance in CY21 – Gurgaon and Noida leading the pack. Major launch success was witnessed in DLF’s independent floor products clocking cumulative sales to launch ratio (as of Oct ’21) of c.90%. This is followed by Godrej selling out ~85% of the launched inventory in Noida Godrej Woods (Sector 43). Elsewhere, Macrotech has clocked ~60% sales to launch in Lodha Woods (Kandivali E) while Oberoi’s Elyssan (both phases) running at c.45% sales to launch ratio. Key upcoming launches within the listed space: Emkay believes Prestige Estate Mulund project launch (overall >10msf of additional supply) will set the tone for Mulund and adjacent markets as well. An aggressive pricing strategy there can drive upgrade demand from adjacent markets including Thane. The much awaited Oberoi’s Thane launch is the second one to watch out for, where unit configuration and pricing will be a key notables. Elsewhere, in NCR, DLF’s Central Delhi launch will be key to track.