Mumbai, June 27: Aided by strong collections and delivery lined up for next 2-3 years, the real estate companies in India are estimated to clock 22 per cent CAGR in revenue over FY25-FY27 to Rs 861 billion, a report showed on Thursday.EBITDA is expected to post a 26 per cent CAGR to Rs 252 billion and blended operating margin is estimated to improve by 168bp to 29 per cent over FY25-27E, according to the sector update report by Motilal Oswal Financial Services Ltd.
“With the timely execution of strong project pipeline, companies will achieve robust collections. Collections are expected to clock a 36 per cent CAGR to Rs 1.5 trillion over FY25-27E,” the report mentioned.
Strong collections should result in healthy operating cash flow (OCF) generation of Rs 600 billion by FY27E, while cumulative OCF is expected to be Rs 1.4 trillion over FY25-27E.
With strong cash flow generation, developers are shifting their focus to business development to sustain the strong growth trajectory. Additionally, strong OCF generation allows developers to keep net D/E in check and at the comfortable level of below 0.5x,” the report noted.
In the top seven cities, the top 10 developers have seen a notable consolidation in each market, with their cumulative contribution rising from 22.7 per cent to 31.9 per cent in launches and absorption is catching up from 19.0 per cent to 23.1 per cent over FY15-FY25.
“We believe consolidation will allow our coverage companies to gain market share and keep growing at a better pace compared to the broader market,” it added.
The affordability index (EMI-to-income ratio) for all the top eight markets tracked by Knight Frank is in the range of 20-30 per cent, which indicates better affordability in those markets and consequently consistent growth in housing sales.
“Mumbai Metropolitan Region (MMR) is the only market where the affordability index is 50 per cent; however, it is important to note that MMR is getting more affordable year after year,” the report said.