Residential sales for listed developers were down 35% YoY; most reported ~50- 60% YoY decline, except GPL (+70% YoY). Seamless adoption of online booking systems, higher share of NRI sales, and demand for larger homes helped. Collections saw a sharper decline, down 50% YoY, owing to lower construction activity and deferral of demand letters, although lower outflow on construction spend/overheads aided operating cash flows and debt levels. The momentum has improved since July, especially in new bookings, where the outlook on recovery is better than collections/operating cash flows.
Rental collections for Office have been >95% for 1QFY21, with broadly stable occupancy levels and most developers witnessing no material rental re-negotiations. The capex outlook was largely restored across developers, as commentary suggests that the LT demand outlook remains intact and supply from smaller players is likely to falter on lack of funding. Near-term leasing outlook is tepid due to the ongoing lockdown, marginal increase in vacancy levels and muted escalations in rentals are likely for FY21
Mall developers offered rental waivers (minimum guarantee rental) − ranging over 50-100% − to tenants, for 1QFY21 (lockdown period). Mall owners are also likely to offer graded waivers over a large part of FY21, till business is back to normalcy. Footfalls across malls remain weak, with Bangalore malls reporting just 20-25% footfalls, and overall pan India retail sales down 63% YoY in July (Source: RAI). The hospitality portfolio for most developers reported low-to-nil occupancy (due to the shutdowns) and losses at the Ebitda level. Mall owners expect sales to improve by 3Q during the festive season and with the opening of Multiplexes / Dining, although a full recovery may still be some quarters away.
Realty Developers are sanguine on a recovery in 2Q, and are lining up new launches in 3QFY21, by when labour availability is also expected to reach pre-Covid levels.
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