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Real Estate Companies Profits Dip

Last updated: September 15 2009
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  • Real Estate Companies Profits Dip

    Source: Economic Times

    Long way to go as top 9 realtors' net dips 76%
    6 Aug 2009, 1114 hrs IST, Sanjeev Choudhary, ET


    NEW DELHI: India’s struggling realty industry may have sprouted some green shoots of late, but the top nine listed real estate firms posted a 76%

    dip in profit and 57% fall in sales in the June quarter, prompting the segment leader to observe that the industry is not “completely out of the woods” .

    Analysts said the revival in demand could improve things, especially in light of a government subsidy for loans taken for affordable housing, but warned that a possible price war between players sitting on huge inventories could spoil the scene. “The recovery of the sector will depend a lot on the sustenance of demand,” said Shailesh Kanani, a real estate analyst with Angel Broking.

    Rupesh Sankhe, another real estate analyst with Centrum Broking, felt low-priced homes will continue to drive up demand , even though it may not be, “anywhere close to what we saw in 2006 and 2007”.

    DLF, India’s largest listed real estate developer, sold 2.5 million sqft of home space in Delhi and Bangalore in June quarter and wants to launch another 16 million sqft of residential space this fiscal. DLF reported a 79% decline in profit and 57% slide in sales for the June quarter.

    “There has been a reasonable revival in demand for homes not just in low-cost or mid-income , but also for high-end ,” DLF vicechairman Rajiv Singh told an analyst conference call on Friday.

    His immediate competitor, Unitech, reported 63% decline in profit with sales down by half.

    “Property prices have come down and so has the interest rate. That’s why home buyers are again looking at the property market ,” said R Nagraju, head of corporate planning at Unitech. The firm is targeting to sell a total of 30 million sqft of space this fiscal.

    Other realty players Indiabulls Real Estate, Parsvnath, Omaxe, HDIL, Akruti, Sobha and Purvankara too have reported decline in profits up to 95% for the June quarter. Parsvnath chairman Pradeep Jain said the worst was over for the sector and demand had started picking up. But the pick-up in demand hasn’t really erased all concerns as DLF’s Rajiv Singh said the sector was still not “completely out of the wood
    Last edited August 8 2009, 04:30 PM.
  • #2

    #2

    Re : Real Estate Companies Profits Dip

    Rentals take a nose dive; corporates moving into furnished office
    7 Aug 2009, 1517 hrs IST, Vivek Shukla , ET Bureau


    Bustling Gurgaon is witnessing a furious rush by many small and even big companies to shift to other new places. Reason? They are getting space in

    nice buildings at far cheaper rents. As if this were not enough, they are getting fully furnished office space.

    According to realty experts, rentals have touched the nadir during the last couple of months. Many IT companies or those who had far bigger spaces than their requirements are moving to compact offices.

    Many buildings of DLF, including their Cyber City, and commercial buildings near Golf Course in Gurgaon have seen a crash in rentals, by up to 45-50 %. The space that was not available even for Rs 110 sq feet is now easily available for Rs 50-55 per sq feet, says Rajat Mahajan of Integrated Pan Realty Solutions.

    Naturally, in order to cash in upon the situation, many companies are ready to shift to new places, even sacrificing their deposit of lock-in-period .

    Devender Gupta of Century 21 India says that despite loosing the money of lock-in-period , many companies are shifting to other places. That clearly proves the point that rentals in Gurgaon are witnessing a big nose dive.

    The best thing is that apart from cheaper space, companies are also getting fully furnished offices at almost half the rates compared to what they were paying.

    Harish Kumar, an estate manager of a US-based IT firm, says that they too shifted their office as cheap space was available . "I informed the ground reality to my office in America. They were fully convinced with me that in times like this when it is tough for IT firms like us to spend huge money on rentals, we should find ways to save overheads."

    He was, however, specifically told by his US-based IT firm to ensure that the new office is fully furnished. Harish did not find it difficulty to find a cheaper as well as furnished office for his company as a large number of companies had shifted to other places.

    ================================================== ==

    No wonder this happens in chennai also. Rental spaces are vacant and rents are falling









    .
    Last edited August 8 2009, 04:33 PM.

    Comment

    • #3

      #3

      Re : Real Estate Companies Profits Dip

      The true picture could be even more worse.

      Comment

      • #4

        #4

        Re : Real Estate Companies Profits Dip

        Price dip

        But will realty prices dip to reflect the new demand vs supply Gap.

        Comment

        • #5

          #5

          Re : Real Estate Companies Profits Dip

          Dear friend,

          The builders/promoters have a lot of hope on the Govt. and politicians that they will do some thing or the other like further reduction in interest rates, financial help from PSU Banks to tide over their financial problems etc. to increase the buying interest. They still hold on to their prices with piecemeal reductions and delay the projects very much.

          ks2071746

          Comment

          • #6

            #6

            Re : Real Estate Companies Profits Dip

            Originally posted by contra View Post
            The true picture could be even more worse.

            Dear friend,

            Most developers bought land banks at exhorbitant rates and they are not able to manage their cash position due to this. Some are returning the land bought from Govt. even with penalty as the current value realisation may be much worser than the penalty for not honouring their agreemnt for purchase of Govt. land. They thought they are Indian Sheikh with land banks ike the Gulf Sheikhs with oil fields, and both are in trouble now with lower price realisation due to economy downtrend. Gulf Sheikh may recover faster than our Indian Sheikh- RE firms.
            ks2071746

            Comment

            • #7

              #7

              Re : Real Estate Companies Profits Dip

              Originally posted by ks2071746 View Post
              Dear friend,

              Most developers bought land banks at exhorbitant rates and they are not able to manage their cash position due to this. Some are returning the land bought from Govt. even with penalty as the current value realisation may be much worser than the penalty for not honouring their agreemnt for purchase of Govt. land. They thought they are Indian Sheikh with land banks ike the Gulf Sheikhs with oil fields, and both are in trouble now with lower price realisation due to economy downtrend. Gulf Sheikh may recover faster than our Indian Sheikh- RE firms.
              ks2071746
              Valuations of many land banks in India have reduced by 1/3rd according to a leading mortgage banker in India. Land prices in some places in Bangalore outskirts have corrected by 40% since peak but are still very high and unaffordable. Atleast in Bangalore land prices will see a major decline in near future.

              Comment

              • #8

                #8

                Re : Real Estate Companies Profits Dip

                Originally posted by contra View Post
                Valuations of many land banks in India have reduced by 1/3rd according to a leading mortgage banker in India. Land prices in some places in Bangalore outskirts have corrected by 40% since peak but are still very high and unaffordable. Atleast in Bangalore land prices will see a major decline in near future.
                I too will love to see land prices drop in Bangalore. Alas it wont happen. In Brookefields almost 20Km from MG Road a silly flat costs 40L. We just dropped by to their home a few days ago and it is just 1100 odd sqft. Also that includes common area. My guesstimate is the real area is about 800sqft built up.
                From this it is clear prices are shooting up in Bangalore and will be followed by Chennai.
                As for RE firms showing profit dip. That is perfectly understandeable. They were making 400% profit on the property expense using the landowners land and buyers money to build. Infact sometimes it can be even infinite % profit as the builders hardly invested anything from their hands. That has ended.
                Think of a builder like Adarsh who was considered as the Gold standard. A friend of mine has not got his flat booked in 2004 end until today. These builders have taken out the money and are wanting future buyers to bear the cost of past constructions and since there is no way to sue them for delay they continue to hold money without interest.
                THis is coming to an end. So profits will even fall and dip to negative. Does it mean RE prices will fall? Not really.
                Available, usable land price will soar.
                Availabe, usable flats will cost a premium.
                New flats will not sell fast. Simple logic!

                Comment

                • #9

                  #9

                  Re : Real Estate Companies Profits Dip

                  house/flat prices in chennai has fallen down

                  House and flat pricess has fallen down in chennai. & India I agree with your overall look lovebird. It is a good post. Thanks!!!

                  Comment

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