Pre-sales are a promise, not a result

Every quarter, listed Indian developers announce their pre-sales, and the share prices of many of them move on that number more than on anything in their audited results. Pre-sales are the value of homes booked in the period. Analysts compare them with the guidance given at the start of the year, and a developer that beats its guidance is rewarded. I understand why. Revenue in our industry is recognised years after a home is sold, so investors look for a measure that moves with demand.

I stopped guiding on pre-sales at Mridvika in 2021, and I want to explain why I think the measure does quiet damage when it becomes the number a company is managed to.

Three numbers that measure three different things

A residential developer's year can be described by three figures. Pre-sales are the value of agreements signed, net of cancellations. Collections are the cash buyers pay, in instalments that follow construction milestones. Revenue, as Mridvika applies Ind AS 115, is recognised when control of a home passes to its buyer, which for us is when we offer possession after receiving an occupancy certificate. We adopted that basis when the standard took effect in April 2018, shortly after our listing. It reduced our opening equity, because revenue recognised under the earlier percentage-of-completion approach had to be reversed.

In 2025–26 our pre-sales were ₹4,120 crore, collections ₹3,480 crore and revenue ₹2,960 crore. Each figure is accurate, and each measures something different: demand at the moment of booking, the cash that demand has produced so far, and homes we have finished and handed over. A year of heavy launches pushes pre-sales up long before it produces cash or revenue. A year of handovers does the opposite.

The difficulty is that pre-sales are the easiest of the three to manage. A developer can raise them by launching more projects, by moving launches into the final weeks of a quarter, or by offering payment plans that ask little of the buyer until possession. None of these is improper. All of them can make a booking less likely to become cash.

What a booking leaves out

Take payment plans first. A construction-linked plan asks the buyer to pay as the building rises. A plan that asks for 10 or 20 per cent when the agreement is signed and the rest on possession produces the same pre-sales figure for the quarter, but far less cash for construction, and a buyer who has paid little is more likely to walk away if prices soften. Subvention schemes, in which the developer pays the buyer's home-loan interest until possession, go further. Lenders and regulators looked hard at them after buyers in several cities were left servicing loans for homes that were never finished. Under Ind AS 115 the interest a developer pays on a buyer's behalf is, in substance, a reduction in the price, but the pre-sales figure announced to the market is usually the headline agreement value.

Cancellations are the other gap. A booking cancelled in a later quarter is deducted from that later quarter's pre-sales, not from the quarter in which it was announced, so the original number stands. In a falling market, gross bookings can hold up while cancellations rise quietly behind them. At Mridvika cancellations were 7.8 per cent of gross bookings in 2025–26; in 2020–21 they reached 14 per cent. I report the rate every quarter, because a pre-sales figure without it tells investors less than it appears to.

Launch timing matters too. In the quarter to March 2021, before we changed our guidance, 38 per cent of our bookings were signed in the final three weeks, many of them at launch events with offers valid only for the day. A year later the cancellation rate on those late bookings was nearly twice the rate on bookings made earlier in the same quarter.

None of this argues against pre-sales as a measure of demand. It argues against making pre-sales the number by which management is judged and paid, because the measure rewards precisely the behaviours that create risk for buyers and for the balance sheet.

Guiding on cash and keys

Since 2021 our guidance has been for collections and handovers: the cash we expect to receive from buyers and the number of homes we expect to hand over. We still report pre-sales, alongside the cancellation rate, the mix of payment plans and the share of bookings made in the last month of each quarter. We also report the value of homes sold but not yet handed over, ₹6,850 crore at March 2026, and the estimated cost to complete them, so that an investor can see both the margin still to come and the spending needed to earn it.

Collections are harder to flatter. They require buyers to pay, which requires construction to reach the milestones their agreements specify, which in turn requires the money to be in the project. Handovers are harder still: a home is either ready for possession with an occupancy certificate or it is not. A developer that guides on cash and keys is guiding on things that only finished work can deliver.

The change had costs. Our management incentive scheme previously paid on pre-sales, and moving it to collections and handovers reduced the sales team's bonuses in 2021–22, when collections lagged a strong year of bookings. Some analysts complained that we had removed the number they found most useful, and for two quarters our results calls were spent explaining the change. One analyst told me we had made the company harder to model. I think we made it harder to model optimistically.

For directors the practical test is short. If a developer's management is paid on pre-sales, ask what share of bookings arrived in the last fortnight of each quarter, what the payment-plan mix is, what the cancellation rate was a year after booking and how much of last year's pre-sales has already turned into cash. If those answers are not readily available, the company is being managed to a number that has not yet become money.