The net debt levels of listed real estate developers have fallen by 37% since the first wave of Covid-19.
A report from ICICI Securities noted that the decline in debt levels was achieved through a combination of reducing the cost of debt by 80 to 160 basis points (bps), reducing corporate overheads. from 20 to 40% compared to pre-Covid levels, operating cash surpluses, asset sales and equity are raised either through QIP or by dilution at the SPV level.
“On an aggregate basis, the listed developers of our hedging universe (ex-REIT) were able to reduce their level of consolidated net debt by 37% to Rs 274 billion (ex-DCCDL) between Q4FY20-Q1FY22 (20 March to June 21) ”, he declared.
As the entire real estate industry in India, especially the unlisted space, continues to struggle with high cost and amount of debt, the balance sheets of listed developers have become leaner, which places them in a strong position to invest for medium-term growth and is likely to accelerate the pace of consolidation in the sector.
The report noted that the developers used a mixture of organic and inorganic pathways to reduce debt.
The report notes that listed developers will invest in growth once the impact of Covid wears off. In line with the stated intention of the majority of developers in our coverage universe, although they have protected their balance sheets during the harsh period affected by Covid, they will resume investing in new plots of land wisely to grow their business. over the next three to four years, he says.