DLF beats slowdown in realty market with 138% sales jump

The Rs 3,160-cr sales booking for realty major DLF in the first half of the financial year

If sales decline for real estate companies in recent times made you believe the sector was hit by a slowdown, think again. The Rs 3,160-crore sales booking for realty major DLF in the first half of the financial year — 138 per cent more than in the same period the previous year — seems to prove just the opposite. The company’s performance could well be the silver lining for a sector that has seen other players like Unitech and Godrej Properties battling slowing sales during the same period.

DLF’s sales bookings had stood at Rs 1,326 crore in the first six months of 2012-13 and at Rs 3815 crore in the full financial year, according to company’s presentation to analysts. It sold 2.71 million square feet of space during the first half of this year and launched luxury projects Camellias and Crest in Gurgaon, besides a few others in micromarkets like Lucknow.

According to experts, DLF has been very cautious in launching new projects and is going for premium projects, which offer high margins.

KimEng analyst Anubhav Gupta says: “DLF is definitely bucking the trend. The first half for DLF was very good — at a time the overall market was not doing well.” He, however, cautions these numbers might not be sustainable. “The coming quarters would be slow for DLF and it might be difficult to maintain these sales numbers. In the first half, the bulk of its sales have come from just one luxury project in Gurgaon.”

In a recent interview with Business Standard, DLF CFO Ashok Tyagi had said: “For 2014, we expect Rs 6,000-crore sales, compared with Rs 3,800 crore last year. In the first half, we have already achieved Rs 3,200-crore sales. During the rest of the year, we will launch two residential projects in Gurgaon — Ultima Phase-II and a group-housing one. And, we will continue to sell Camellias and unsold stock in other cities like Kochi, Hyderabad, Lucknow, Chennai, Chandigarh and Indore.”

Even as he accepted there was an impact on demand due to market conditions, he said: “Overall macroeconomic sentiment, continuing increase in interest rates and withdrawal of upfront subvention scheme are clearly the things that have affected demand from a fencesitter’s standpoint. But untapped demand potential exists.”

Of late, the real estate market has been struggling with low sales and high inventory. Discounts and other schemes offered by developers to boost sales are at an all-time high. Due to such market conditions, many are expecting a price correction soon in some key markets. KimEng’s Gupta says: “We expect price corrections in Mumbai, Gurgaon, Pune and Noida from the fourth quarter. It is definitely on the cards.”

Sales bookings for Unitech, another major realty player, fell 53.35 per cent to Rs 717 crore in the first half of this year, while Godrej Properties saw a decline of 37 per cent to Rs 944 crore. During this period, Unitech launched a project in Gurgaon, while Godrej launched some in Gurgaon and Mumbai.

In a presentation on its website, Godrej says its sales have been moderate due to weak market conditions and few launches.

Unitech Managing Director Sanjay Chandra said in a company statement: “The current challenging macroeconomic environment had a strong bearing on the demand for real estate in the company’s key markets during the second quarter. With the onset of the festive season, there has been a gradual improvement in demand and the company has been taking measures to boost sales. It recently resumed launch of new residential projects and the initial response has been quite encouraging.”