Feb’21 trends: Demand stable sequentially, though yoy comparison still favorable

This report is a monthly update on residential demand and supply trends and inventory levels in key cities of India. We assess the trends witnessed in Feb'21.

* For Tier 1 Indian cities, new launches continued to decline in Feb’21 (down 18% yoy), while absorptions rose 13% YoY after a mere 3% decline in Jan’21. Overall demand trends depict a strong recovery across markets. Accordingly, unsold inventory (in units) was down 11% yoy at 33 months from 29 months in Feb’20. TTM absorptions were down 20%, while new launches fell 46%.

* MMR market witnessed 10% yoy growth in absorptions even as new launches were down 35%. Unsold inventory (in units) was, thus, down 15% yoy at 30 months (similar levels as Feb’20). TTM absorptions were still down 18%, while new launches were down 45%.

* NCR market saw a modest increase of 4% yoy in absorptions due to a sharp pick-up in new launches (5.85x Feb’20 levels). Unsold inventory was, however, down 8% yoy at 88 months from 56 months in Feb’20 on account of better absorptions in the past few months. TTM absorptions were down 41%, while new launches were down 54%.

* Bengaluru recorded a 7% YoY drop in unsold inventory − the biggest decline in 18 months, driven by a 26% drop in new launches. Demand was up 12% yoy for the month. For the TTM period, absorptions were down 33%, while new launches were down 43%.

* Among other key markets, Pune and Hyderabad stood out. Pune reported a 25% rise in absorptions in Feb’21 and Hyderabad absorptions rose 19% yoy. While TTM absorptions declined 18% in Pune, Hyderabad witnessed a 23% decline. TTM new launches, however, were down 55% YoY in Hyderabad and 34% in Pune, thus driving down unsold inventory by 16% in Pune even as Hyderabad witnessed 12% growth.

Top picks from Emkay coverage

* Oberoi Realty (Buy, TP Rs647): With unsold residential inventory of over 10x its FY20 revenues and a potentially ReITable annuity assets portfolio of over 8msf by FY25, Oberoi is well-placed for future opportunities. Among projects, recent quarters have witnessed good traction in its Esquire (Goregaon), Sky City (Borivali) and Mulund projects. In our view, the key near-term catalysts are new launches at Borivali phase II, Exquisite III (Goregaon) and Thane.

* Sunteck Realty (Buy, TP Rs412): With potential saleable inventory of over 20x of its FY20 pre-sales and pending receivables from existing/ongoing projects exceeding its pending construction cost, Sunteck is well-placed to reap benefits of its aggressive push into the affordable homes category. A balance sheet with low-gearing and surplus cashflow also means that Sunteck can continue to pursue more opportunities in Mumbai.

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