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Net debt of top 8 listed realty firms dip 43% to Rs 23,000 crore in last 3 years: Anarock

Net debt of top 8 listed realty firms dip 43% to Rs 23,000 crore in last 3 years: Anarock

Real estate consultant Anarock has reported that the net debt of the top eight realty firms in India decreased by 43 percent to Rs 23,000 crore in the last fiscal year, compared to approximately Rs 40,000 crore in the 2019-20 fiscal year. This reduction in debt can be attributed to improved cash flow resulting from robust housing sales across the country.

The strong and sustained demand for housing has provided an impetus for leading large and listed developers in India to significantly reduce their debt burden. As the real estate sector experiences unfettered demand for housing, developers have been able to generate healthy cash flow, enabling them to actively manage and reduce their debt levels. This positive development indicates an overall improvement in the financial health of these realty firms and showcases the resilience of the Indian real estate market.

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Anarock conducted a financial analysis of the top eight residential real estate developers in India, namely DLF, Macrotech Developers (Lodha brand), Godrej Properties, Prestige Estates Projects, Sobha, Brigade Enterprises, Puravankara, and Mahindra Lifespace Developers Ltd.

According to the analysis, these developers have successfully reduced their net debt from Rs 40,500 crore in the fiscal year 2019-20 to over Rs 23,000 crore in the fiscal year 2022-23. This substantial reduction in net debt highlights the positive financial performance and improved cash flow management of these leading developers.

Net Debt Per Capita Definition

The efforts made by these developers to streamline their operations, optimize costs, and focus on sales and cash flow generation have played a significant role in lowering their debt burden. This trend indicates a healthier financial position for these real estate firms and reflects their ability to adapt to market dynamics while meeting the robust demand for residential properties in the country.

According to Anarock’s analysis, the average cost of debt for the top eight residential real estate developers decreased from 10.3 percent in the fiscal year 2019-20 to 9 percent in the fiscal year 2022-23. In the fiscal year 2020-21, the interest cost stood at 9.05 percent, and it further declined to 7.96 percent in the fiscal year 2021-22.

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Anarock Chairman Anuj Puri commented on the findings, stating that the reduction in net debt is primarily driven by increased sales and revenues. These developers have experienced sales volumes that have surpassed pre-pandemic levels and are on track to achieve new peak levels.

Puri further highlighted that the significant reduction in debt can be attributed to improved cash flows generated over the past few years. Notably, the widening gap between gross and net debt indicates a comfortable financial position for these developers, reflecting their strengthened financial health and enhanced ability to manage their debt obligations.

Overall, these findings reflect the positive impact of improved sales performance, increased revenue, and effective debt management strategies employed by these top residential real estate developers in India.

Anarock’s analysis revealed that the difference between the gross and net debt of the developers has increased significantly. In the fiscal year 2019-20, this difference stood at approximately Rs 7,400 crore, whereas in the fiscal year 2022-23, it has expanded to nearly Rs 15,200 crore. This widening gap indicates a more comfortable financial position for these developers.

Anarock also highlighted that despite marginal increases in the cost of debt due to periodic interest rate hikes since April 2022, the cost of debt remains lower than pre-pandemic levels observed in the fiscal year 2019-20. It further stated that these interest rate hikes are unlikely to impact the execution capabilities of the large and listed players in the real estate sector.

Anuj Puri, Chairman of Anarock, emphasized that these findings reinforce the increasing confidence of homebuyers in projects undertaken by these developers. He noted that these developers have entered the new fiscal year with stronger and healthier financial books and values, reflecting their improved financial performance and stability.

Overall, the analysis underscores the positive trajectory of these leading developers, demonstrating their enhanced financial health, execution capabilities, and the growing trust of homebuyers in their projects.

In addition to the top eight listed developers, Anarock noted that large unlisted players in the real estate sector are also exhibiting a similar trend of solid financial performance. The market share of these large developers, whether listed or unlisted, has nearly doubled from 17 percent in the fiscal year 2016-17 to 36 percent in the fiscal year 2022-23.

Anarock Research further reported that the previous fiscal year, spanning from April 2022 to March 2023, witnessed the sale of approximately 3.65 lakh units across the top seven cities in India. This sales volume represents the highest figure recorded in the past five years, indicating a notable recovery and revival in the real estate sector.

The combination of robust financial performance, increased market share, and improved sales volumes underscores the positive momentum and growth experienced by both listed and unlisted large developers in the Indian real estate market.

Anarock’s analysis focused on the first quarter of the current fiscal year (April to June 2023) and revealed that approximately 1.14 lakh units were sold across the top seven cities in India during this period. This quarterly sales figure represents the highest-ever recorded sales for a quarter, indicating a strong demand and positive market sentiment in the real estate sector.

Anarock clarified that the analysis considered the financial performance of eight listed players who have consistently reported their cost of debt in investor presentations. These listed players were selected for their transparency in disclosing their financial information, allowing for a comprehensive assessment of their debt positions and financial health.

The high sales volume achieved in the first quarter of the current fiscal year reflects the resilience and recovery of the real estate sector, driven by factors such as improved buyer confidence, favorable policy reforms, and attractive pricing and offerings by developers.

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