Real Estate Development: Weathering the storm - SBV credit guidance creates challenges

Real Estate Development: Weathering the storm - SBV credit guidance creates challenges

SBV recently issued guidance on FY26 credit quotas, setting a lower system-wide credit growth than FY25 and capping credit growth to the real estate sector at no higher than each bank’s overall credit growth. This, together with rising interest rates and surging supply, is expected to curb RE demand in the short term. Reflecting this, we cut our aggregate presales forecasts for the six developers in our coverage by 23%/19% for FY26/27, respectively, leading to earnings cuts of 7.5%/13.8% for same periods. Our new aggregate earnings forecasts suggest an FY24A-27F CAGR of 16.8% (previously: 22.7%). We see NLG and KDH – now our two top RE developer picks – as more resilient, helped by their focus on affordable-to-mid-end segments with large real demand.