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Listed Developers Reduce Debt, Plan Big Launch in Tier 2/3 Cities

A report by ICICI Securities points to the fact that net debt levels of listed real estate developers have declined 37% since the first wave of the COVID.

“The decline in debt levels has been achieved through a combination of reduction in the cost of debt by 80-160 basis points (bps), reduction in corporate overheads by 20-40 percent from pre-Covid levels, operating cash surpluses, asset sales, and equity capital raise either through the QIP route or through dilution at the SPV level,” the report said.

Between March 2020 to June 2021, the consolidated net debt levels have come down by 37 percent to Rs 274 billion (ex-DCCDL).

Separately, in its annual corporate results announced in July 2021, Omaxe reduced its net debt to Rs 1396 cr in 2020-21 from Rs 1490 cr in 2019-20. The company also declared a sales booking of Rs 2051 cr during 2020-21.

The preference of homebuyers for listed developers is seeing an upward trend in the last few years. The advent of the pandemic has accelerated this trend. Strong fundamentals, financial heft, and a reputation of delivery are the key factors that have helped homebuyers tilt towards listed developers.

Owing to the reverse migration, listed developers have found a huge untapped market in tier 2/3 cities as their next stage of growth. These cities have become extremely important also owing to the Government’s infrastructure push.

According to a report by Anarock, data from the financial presentations of the top 7 listed realty companies reveals that listed players are gearing up to launch close to 92.5 mn sq ft of new residential space within the next 1-2 years. Apart from the top 7 cities, they are also zeroing in on these major tiers 2 and 3 cities – and at least 70-75% of this supply may be launched in FY2022 itself.

Omaxe, one of the early entrants in State Capitals and tier 2/3 cities, has its presence in Lucknow, Ludhiana, New Chandigarh, Indore, and Faridabad among others.

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