Realty firms' net profit to halve

Volumes fell most in Gurgaon, Noida and Mumbai in the primary markets

Net profits of real estate companies might halve in the December quarter of this financial year, due to weak home sales in residential markets such as Mumbai and Delhi/ NCR.

The turnover could see average growth of 25 per cent during the quarter, according to data culled by top brokerages.

In spite of the festive season, which usually sees a number of launches and higher sales, volumes during the December quarter were muted due to high prices, the overall macro environment and inventory, brokerages said.

“Gurgaon, Noida and Mumbai were the most affected in the primary markets, with volumes correcting heavily,”  Kotak Institutional Research said in a recent report, adding Bangalore and Pune, main markets for office leasing, had also slowed.

According to a recent report from global property consultant Knight Frank, about half the units under construction are still unsold in Mumbai.

The total number of units launched during January to September 2013 in Mumbai is down 28 per cent over a year, at 47,500 units. Absorption during the period is down 26 per cent, it said.

A few good schemes
Indiabulls Real Estate’s Sky Forest, Lodha’s Blue Moon in Central Mumbai, L&T’s project in Powai and Kalpataru’s in Goregaon saw good response due to better pricing and subvention schemes, Mumbai-based Motilal Oswal said.

Bangalore, the most stable market in the past couple of years in home sales, also started softening in the Rs 1.5 crore-plus bracket since September, said HDFC Securities analyst Adidev Chattopadhyay, in his quarterly preview report.

The BSE Realty Index outperformed the benchmark BSE Sensex — the former rose 19.3 per cent during the quarter and the broader index by 8.5 per cent. However, this was due to value buying in select stocks and political expectations, among others.

DLF, the country’s largest developer, could post an average net profit of Rs 95 crore in the quarter against Rs 248 crore in the same period of 2012-13 and average net sales of Rs 2,021 crore against Rs 1,310 crore earlier. Lack of launches and the fact that no major project is crossing the revenue recognition threshold could impact its numbers. DLF’s launch plan and management forecast, and progress on the Aman Resorts sale, are the key things to watch, say analysts tracking the company.

Oberoi Realty, the second largest by market value, is likely to post an average net profit of Rs 78 crore against Rs 134 crore in the third quarter. It is expected to post average net sales of Rs 188 crore as against Rs 286 crore in the earlier year’s quarter. Lack of new launches during the quarter and inventory in the Goregaon East project are reasons behind the weak quarter. The launch of its Worli project is the key factor, analysts said.