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Pre-sales to witness 30% YoY growth in FY24E

Launches to double in 2H from 30msf in 1HFY24

* While 2Q is generally considered to be the seasonally weakest quarter, the listed universe (top 12 companies) has bucked this trend. The universe registered its secondbest quarter ever with cumulative sales of INR252b, up 54% YoY/44% QoQ.

* This growth was primarily driven by a strong momentum in sustenance sales as launches were subdued for most of the companies, barring a few. Ongoing projects contributed 56% of the total pre-sales in 1HFY24.

* New launches posted an average absorption of 60% and contributed 44% to pre-sales during the same period. The listed universe is likely to witness a sharp pick-up in launches in 2HYF24 as most of the players have less than 12 months of inventory now.

* Cumulative launches for our coverage universe are expected to double in 2H from 30msf in 1HFY24. In value terms, launches would catapult to INR820b from INR260b during the same period. Hence, we expect our coverage universe to deliver 30% YoY growth in pre-sales in FY24 vs. an initial growth guidance of 15-20%.

* As the rate hike cycle has peaked, we believe the residential real estate cycle is unlikely to face any significant headwinds. We expect demand to remain healthy for at least the next 2-3 years. We prefer companies that are able to outperform their peers and whose valuations do not reflect this outperformance. PEPL, GPL and SOBHA are our top picks

Top-12 listed companies delivered 36% YoY growth in pre-sales in 1HFY24

* The listed real estate companies witnessed sustained demand traction as they delivered 36% YoY growth in pre-sales to reach INR427b in 1HFY24. In the same period, Bengaluru-focused companies reported 63% YoY growth in bookings.

* Despite seasonality, cumulative sales from the top-listed companies rose 44% QoQ in 2QFY24 as GPL, PEPL, and PURVA posted a standout performance backed by new launches that enabled them to double their bookings YoY.

* With 54% of FY23 bookings already achieved in 1HFY24, the listed universe (top 12 players) remains on track to surpass the FY24 guidance of 15-20% growth

Launches accelerating; coverage universe to launch INR820b worth of projects in 2H

* At the beginning of FY24, inventories for most of the companies in coverage were below 12 months, yet launches in 1HFY24 remained flat at ~30msf that resulted in further reduction in inventories across ready and ongoing projects.

* Our coverage universe launched ~INR260b worth of projects and reported an average absorption of 60%, contributing to 44% of overall pre-sales in 1HFY24.

* Strong momentum in ongoing projects sustained and contributed 56% to overall pre-sales, leading to a decline in inventory to ~INR610b from ~INR720b.

* With inventory overhang down to 10 months, our coverage universe now plans to launch over ~INR820b (60msf) worth of projects in 2HFY24, which will drive ~30% growth in bookings to ~INR851b in FY24.

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