Real Estate Q3 Results Preview- Residential Demand Remains Strong; Commercial In Recovering Phase: Nirmal Bang

Nirmal Bang Report

Residential demand remains poised for an upcycle, primarily buoyed by positive buyer sentiments and affordability. In terms of cities, the Bengaluru residential market continues to witness strong demand cycle on the back of:

1. bulk hiring by IT and Global Captive Centres,

2. salary increments for IT employees and

3. best-in-class affordability.

As per Knight Frank, the inventory overhang in Bengaluru remains at a comfortable level of ~15 months while affordability remains best-in-class i.e. unit price-toper-capita-income ratio is at the lowest level i.e. 16 times compared to the overall industry level of 20-24 times, allowing developers to take gradual and consistent price hikes (~6-8%) in an inflationary environment.

On the other hand, Mumbai has the highest level of inventory level i.e. ~35-40 months Demand for commercial realty will continue to recover, led by:

1. large-scale hiring in IT/ITeS and other sectors,

2. availability of talent/skills at lower cost and

3. the growing ‘return to office’ trend.

For the ceramic industry, while we do expect growth in volume to continue in Q3 FY23, we expect the sharp increase in prices of natural gas and other raw materials to lead to pressure on operating margins.

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