Real estate

Business model

Two distinct sub-models in listed real estate:

1. Residential developers - buy land, secure approvals, build apartments, sell to homeowners. Revenue is lumpy - recognised on possession (RERA-compliant) rather than booking, so reported numbers lag actual sales. Cash collection lags revenue by 1-3 years.

2. Commercial REITs and developers - build offices, malls, warehouses; lease to corporate tenants. Steady, multi-year rental income. Lower-risk, lower-return profile.

The residential sub-sector is highly cyclical, sensitive to housing demand, mortgage rates, and regulatory cycles (DEMON in 2016, RERA in 2017, GST). Commercial is more correlated with corporate India's expansion appetite.

Key metrics

For residential developers:

• Pre-sales / bookings - leading indicator. Sales velocity in units/quarter, value in cr/quarter
• Pre-sales per launch - quality of demand for new projects
• Net debt - high debt is the sector's recurring problem
• Inventory months - unsold completed inventory ÷ monthly sales pace
• Collections from customers - cash hitting the door, not P&L revenue