Is this the CG issue in the company??
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As many RE stocks are posting all time high Quarterlty Pre-sale numbers. is it beginning of RE upcycle ? any indicators/data points to conlcude…
Observation: Post covid, many sector/employees salaries increased significanlty(Affordability is increased) and bit inclined on RE small cap stocks…
Invested in Kolte, Sunteck , Sobha Ltd , Indiabulls RE
Hi , I am beginning to look at real estate sector, Can we have a quick chat so that I can get to know what to actually look while valuing the sector?
Word of caution with real estate market, IT jobs are getting cut every single day especially senior category types and freshers arent getting placed so it is important to consider RE growth is tied mostly with IT progress as the highest salary earners with disposable income is in IT
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The industry’s inventory rose by 28 per cent year-on-year (Y-o-Y) in H1FY24, com–pared to a 25.5 per cent year-on-year increase in net sales during the same period. This is in contrast to H1FY23, when net sales rose by 24.2 per cent Y-o-Y, while the inventory level increased by just 8.2 per cent Y-o-Y.
As a result, the combined inventory of top listed companies reached a record high of Rs 1.045 trillion, equivalent to 33 months of sales at the current pace
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How can one view the increase in the inventory level of the company?
Unsold Inventory in generally reported in the Earnings Presentation. Below is the snippet from Ashiana Housing’s ppt. If you track the numbers Q-on-Q, you will be able to determine the increase and decrease.
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This article is behind a paywall. Is there any discussion on inventory build up by market, at least for the large ones like MMR, NCR and Bangalore?
Thanks, But I wanted to ask how one can analyze the unsold inventory.
Eg: If the unsold inventory is high that means demand is less
or If the unsold inventory is high that means the company is ready with the inventory and in the next few quarters, we can see the numbers converted into the books of the company
Unsold inventory will generally mean that the RE Co is launching and constructing more units than there is demand in the market or there could be a pricing issue. Please do note that the large RE Cos start constructions only when they have sizeable bookings and they have a sense of the RoE.
A RE Co will only keep inventory for strategic purposes if they foresee a future price rise in the specific location. A case in point is Godrej Prop - They have put the Panvel project on hold as they are waiting for the trans-harbour link to be opened.
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Some information for Mumbai based developers:
New rules for development ahead of them. {Will assume the reader has read the above article}
So if developer RKBuilder (RKB), wants to build in suburb (SB),
and has to have TDR of 50% of final build (fb) squarefeet (sf) acquired,
and if SB has ready reckoner (RR) TDR at, say, Rs 100 per sf,
and DRP has RR at Rs 400 per sf;
then RKB has to buy
40% of fb from DRP at (max possible price) of 360 per sf [90% of RR of 400 = 360]
10% of fb from local SB at (max possible price) of 90 per sf [90% of 100 = 90]
Even though SB may be far away from DRP, RKB will have to shell out premium prices for development.
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