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Realty’s Haemorrhage Continues

Lower sales, plummeting profits & increased debt have hit the real estate sector hard in Q2

Rising steal and cement prices have only added to the despair of the realty sector that is already under the burden of high interest rates, low sales and increasing debt. Read the sector report for details on factors impacting realty companies.

It has been a bloody quarter for Indian realty. Lower sales, plummeting profits and increasing debt have hit the sector hard.

Revenue growth for the realty sector dwindled to 2 per cent levels at a time when other beleaguered sectors have at least managed to put up a decent mid-teen growth. Industry leader DLF managed to post positive revenue growth by just a whisker (its revenue grew by a meagre 2 per cent y-o-y), while one of North India’s largest players, Unitech Ltd., saw its revenue shrink by 1.36 per cent in the September quarter.

What plagues the sector? A high interest-rate regime that spikes up the interest costs of these heavily leveraged companies and also dissuades potential homebuyers from taking loans.

Increased cement prices (up Rs 50 per bag) and steel prices dented bottomlines. Unitech saw its net profit fall 47 per cent (y-o-y); Godrej Properties and Parsvnath Developers both saw their net decline 41 per cent (y-o-y); HDIL’s and Sobha Developers’ net were again both down 31 per cent; DLF’s net declined 11 per cent; while GMR Infra actually reported a loss of Rs 62.53 crore.

High debt continues to haunt the sector. DLF’s debt increased by Rs 1,000 crore to Rs 22,519 crore. Its interest cost went up 21 per cent (y-o-y). GMR Infra’s debt increased by 23 per cent to Rs 26,356 crore (its interest cost soared 50 per cent y-o-y).

Oberoi Realty managed to buck the trend. In Q2 its revenue rose 31 per cent while its PAT was up 17 per cent. The company is debt free and holds Rs 1,400 crore in cash.