Nirmal Bang: Realty Conference Takeaways - High Stress In Residential Segment Persists

Nirmal Bang Report

Based on our recent interaction with real estate experts at the recently concluded 12th Edition of CII JLL Realty Infrastructure Conclave, we maintain our pessimistic view on the residential real estate segment, which was first enunciated in our report ‘Eerie calm before the storm’ dated September 07, 2017.

The key takeaways of the interaction are as follows -

1. Stress in the residential real estate segment to continue for one to two years

2. Resolution of stressed cases is slow moving

3. Despite the recent improvement demand continues to be low

4. Unwillingness of developers to take haircut

5. High risk profile implies low equity commitment from investors

6. Shift in developers’ strategy from margin play to asset turnaround

7. Consolidation has started in the residential segment.

However, in another session, panellists comprising residential developers painted a more optimistic view.

They highlighted that some green shoots of recovery are visible and expect a V-shaped recovery with the sales likely to revert back to pre pandemic levels by Q3 FY21.

Our view on the residential segment -

1. Expect further decline in prices in the U-shaped recovery

2. Sales volume has increased but is substantially below peak sales.

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