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IL&FS default and ongoing specula�ons about DHFL have made industry stakeholders anxious yet again. Moved by the upheaval we

have tried to gauge impact of liquidity squeeze on the sector and developers. In the past 10 years while value of sold stock has

increased by 1.56X, the value of unsold stock has become 4.72X. In terms of units, volumes of sales have gone up by 1.28X while

inventory increased to 3.33X between 2009 and 2018. In the same period lending to the real estate sector has gone up from Rs 1.2

trillion to Rs 4 trillion.¹

2009 2018 Increase

Sales (in units)

Sales (value in crore)

Inventory (in units)

Inventory (value in crore)

Months Inventory

Total debt on sector (INR trillion)

2,17,253

1,31,495

2,83,060

1,64,338

16

1.2

2,78,989

2,05,792

9,43,680

7,77,183

41

4

1.28 �mes

1.56 �mes

3.33 �mes

4.72 �mes

2.56 �mes

3.33 �mes

What happened in a decade:

Exis�ng scenario has exposed the inefficiency within the sector. While debt has grown in a monumental manner and so has

inventory, sales did not go up in the same propor�on. Having borrowed money from different sources, new players kept coming

in the market and kept adding housing stock into the market without any produc�vity. Since sales remained abysmal all this

while, developers are finding it difficult to meet their debt obliga�ons at this point.

(20 Developers)Income : 20,883.34 CrEBDIT : 4,176.67 CrRental Revenue : 1,134.48 CrDebt : 40,591.09 Cr

(34 Developers)Income : 33,109.83 CrEBDIT : 6,621.97 CrRental Revenue : 2,938.38 CrDebt : 74,503.54 Cr

(36 Developers)Income : 24,886.69 CrEBDIT : 4,977.34 CrRental Revenue : 3,715.56 CrDebt : 30,410.23 Cr

Ongoing liquidity crisis has severely hit northern and western ci�es North India (NCR)

Chennai

New Delhi

Mumbai

West India (MMR & Pune)

South India (Bengaluru, Chennai & Hyderabad)

Bengaluru

Pune

Hyderabad

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Source: Liases Foras

CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018

Assessment of turnover (crore)

Value of sold stock (crore) Value of unsold stock (crore)

Sales and inventory trends in value (top-8 ci�es)

1,3

1,4

95

1,2

5,3

31

1,1

8,5

69

1,3

7,9

74

1,4

3,2

11

1

,60

,02

4

1

,78

,39

6

1

,81

,38

9

1,9

6,6

60

2,0

5,7

92

1,6

4,3

38

2,2

3,5

36

2

,86

,62

0

3

,78

,88

5

4,8

5,0

62

5,8

9,4

04

7

,32

,89

3

8,2

5,2

60

7

,79

,12

1

7,7

7,1

83

1621 25 26

33 3646 48

43 41

-

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

7,00,000

8,00,000

9,00,000

10,00,000

CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018

Annual sales in units Unsold inventory in units Months inventory

2,1

7,2

53

2,1

4,7

43

2,1

0,1

09

2,2

8,4

72

2,1

1,6

46

2,2

2,1

49

2,2

4,8

69

2

,37

,18

5

2

,56

,24

8

2,7

8,9

89

Sales and inventory trends in units (top-8 ci�es)

2,8

3,0

60

3

,78

,57

7

4,3

8,4

16

4,9

9,9

49

5,8

4,7

34

6

,74

,88

8

8,5

4,6

68

9

,53

,97

7

9,1

8,7

73

9,4

3,6

80

Source: Liases Foras

Sales: 1.3X

Unsold: 3.3X

Sales: 1.6XUnsold: 4.7X

Our analysis shows that residen�al market generated Rs 2,40,000 crore as yearly revenue in 2018. Top-8 ci�es (Mumbai

Metropolitan Region, Na�onal Capital Region, Bengaluru, Pune, Hyderabad, Ahmedabad, Chennai and Kolkata) cornered more

than 80% of the en�re business. The top-8 generated about Rs 2,06,000 crore as revenue out of the total 2,40,000 crore.

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Total investment in INR trillion

Exposure to Developer Financing

25%31% 33% 35% 35% 35%

39%44%

49%55%

75%69% 67% 65% 65% 65% 61%

56%51%

45%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 9M FY18

NBFC/HFC Banks

FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 9M FY18

Banks (in INR trillion) 0.9 0.9 1.0 1.1 1.3 1.5 1.7 1.8 1.9

NBFCs (in INR trillion) 0.3 0.4 0.5 0.6 0.7 0.8 1.1 1.4 1.8

Total 1.2 1.3 1.5 1.7 2 2.3 2.8 3.2 3.7

1.8

2.2

4

Source: Ambit Capital¹

Total lending tosector increased by:

NBFC/HFC share in lending increased by:

7.33X3.3X

Having extracted important nuggets, we decided to dig deep to analyze the burden on the developers with respect to total

lending on the sector. We examined performance of close to 11,000 developers for holis�c view. It was also no�ced that out of

the total ki�y of 2,40,000 crore of business, top-90 developers in the country accounted for about third of business and

generated Rs 78,879 crore.

We studied exposure to both top-90 listed and unlisted developers. Data for listed companies was taken from public reports and

sources, while for unlisted ones we have relied upon the charge filings that the company submi�ed to Ministry of Corporate

Affairs.

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Evalua�ng repayment capacity of top-90 developers²

90Developers Across India

78,879 CrIncome

15,776 CrEBDIT

7,788 CrRental Revenue

1,45,504 CrDebt

6 YearsOverhang

15,776 CroreRESIDENTIAL EBDIT

7,788 CroreINCOME FROMCOMMERCIAL PROPERTY

+ 23,564 CroreDISPOSABLE INCOME

145,504 CroreTOTAL DEBT

45,128 CroreYEARLY REPAYMENT CONSIDERING4 YEAR LOAN REPAYMENT @11% PA FOR TOP 90 PLAYERS

The total disposable income of top-90 developers (including their rental income from different proper�es) is Rs 23,564 crore but

the repayment required is Rs 45,128 crore. Due to the gross mismatch it seems current debt levels are not serviceable.

In order to meet debt obliga�ons, developers will need to increase their EBDIT by 1.92X. And to make profits to the tune of 15%

the developers will need to increase their EBDIT to 2.20 �mes, or have to achieve more than double the sales.

Total disposable income of all developers (including their rental income from commercial proper�es) is expected to be Rs 57,000

crores but repayment required on their part is Rs 128,772 crores. In order to fulfill obliga�ons, all developers will need to

increase EBDIT by 2.26 �mes. Addi�onally to make profit of 15% the developers will need to increase the EBDIT to 2.60X, or need

to increase sales by 2.6 �mes.

AllDevelopers Across India

2,40,000 CrIncome

48,000 CrEBDIT

9,000 CrRental Revenue

4,00,000 CrDebt

7 YearsOverhang

Evalua�ng repayment capacity of all developers²

48,000 CroreRESIDENTIAL EBDIT

9,000 CroreINCOME FROMCOMMERCIAL PROPERTY

+ 57,000 CroreDISPOSABLE INCOME

400,000 CroreTOTAL DEBT

128,772 CroreYEARLY REPAYMENT CONSIDERING4 YEAR LOAN REPAYMENT @13% PA FOR ALL PLAYERS

Source: Liases Foras

Source: Liases Foras

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Change in price vs land cost (a case of MMR)

2005 2007 2009

Kandivali Project Price (Rs/psf)

Finance Cost (Rs/psf)

Land Cost @ Saleable Area (Rs/psf)

Approval Cost (Rs/psf)

Construc�on Cost (Rs/psf)

Construc�on and Gesta�on (yrs)

Project Cost (Rs/psf)

Developers Profit (Rs/psf)

Profit Margin (%)

2,700

446

300

216

1,000

3

1,962

738

27%

6,700

950

1,500

670

1,100

4

4,220

2,480

37%

5,100

1,155

1,000

612

1,200

4

3,967

1,133

22%

2012 2015 2018

10,300

2,699

2,300

1,442

1,300

5

7,741

2,559

25%

11,600

3,737

2,800

1,624

1,600

6

9,761

1,839

16%

11,820

3,838

2,800

1,655

1,800

6

10,093

1,727

15%

Thus it feels that the situa�on of developers is akin to an elephant in a well which is unable to come out on its own. Somebody

needs to replenish the well. But can we find cheap capital to refill the well? The exis�ng scenario signifies that the industry is at

an inflec�on point and is staring at long-due price correc�on in order to improve sales. But is there a scope to bring down

prices?

2 For the listed players income/EBDIT has been sourced from last reported figures. For private players value of stock sold (BT) in the last four quarters (Oct 17 – Sep 18) has been considered as income and 20% of the same has been assumed as EBDIT as per industry average. Commercial rental income has been added to EBDIT to arrive at total opera�ng income.

References

In the current scenario price correc�on does not seem plausible. In order to stay afloat at such low profit margins, one or more

stakeholders in the industry would have to step in and take a haircut. Who would it be?

Government? FinancialIns�tu�ons?

Developers?

h�ps://www.propstack.com/news/wp-content/uploads/2018/02/Ambit_BFSI_Thema�c_Real-Estate-NBFCs-most-exposed_15Feb2018.pdf1 Ambit Capital report:

Please let us know your thoughts on our inconclusive report by sharing your feedback at contact@liasesforas.com

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Liases Foras is an independent real estate research ins�tute having offices in Mumbai, Bengaluru and New Delhi. Liases Foras was

founded in 1998 as a bou�que non-broking real estate consultancy and has since evolved into a data-focused real estate research lab

employing over 120 people. Liases Foras tracks and closely examines the health of the real estate sector in over 60 ci�es across India,

including all metro and capital ci�es. Liases Foras is the official consul�ng partner of the Na�onal Housing Bank and has created

RESIDEX.

About UsLiases Foras: The Pioneer in Scientific Research in Real Estate

Strategic Partner : information

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Our database includes 125,000 projects amoun�ng to over 50 billion square feet of real estate space, spread across 60 ci�es in India.

Currently, we are monitoring close to 18,000 on-going projects on a quarterly basis.

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