The realty market was more or less subdued during the quarter ended
June 2012. Sales volume and absorption rates were low in the residential
segment, while high inventory and slow execution of projects continue
to be a cause of concern.
Most real estate companies are expected to report flat to moderate growth in sales volumes for the June quarter. The industry may see only a moderate reduction in debt, with most companies, including DLF and HDIL, still showing stretched cash flows. The commercial real estate market was characterised by low absorption and a slight drop in rentals in the metros.
While residential realty prices have remained firm and even risen in some areas of the Mumbai Metropolitan Region, absorption has remained low. As a result, Mumbai-based companies like HDIL and Oberoi Realty are likely to post subdued growth, more so on a sequential basis. The market in Bangalore has been fairly strong and stable, compared with Mumbai and Delhi. This will be reflected in the performance of south-based companies such as Sobha Developers, Prestige Estates and Puravankara Projects.
For real estate companies, close to 70% of the construction cost is derived from the expenses on labour and materials like steel and cement. This has moderated and was more or less stable in the June quarter, compared with the preceding quarters. A sharp slide in the rupee is likely to prompt NRI investment in the property market. Regions such as Bangalore, the National Capital Region and Pune would benefit on this count.
The BSE Realty Index has underperformed the Sensex since the end of February 2012. In the absence of any positive trigger, this is likely to continue in the near term. With no sign of price correction in the offing, volume growth is likely to remain poor.
A softening of interest rates and refinancing of loans could help revive demand and enable companies to complete projects and repay debt.
However, with RBI maintaining a cautious stance on rates, debt-ridden realty companies will have to wait a while before they get any reprieve. Analysts expect Mahindra Lifespace, Sobha Developers and Prestige Estates to post moderate to strong growth in revenues for the quarter.
Most real estate companies are expected to report flat to moderate growth in sales volumes for the June quarter. The industry may see only a moderate reduction in debt, with most companies, including DLF and HDIL, still showing stretched cash flows. The commercial real estate market was characterised by low absorption and a slight drop in rentals in the metros.
While residential realty prices have remained firm and even risen in some areas of the Mumbai Metropolitan Region, absorption has remained low. As a result, Mumbai-based companies like HDIL and Oberoi Realty are likely to post subdued growth, more so on a sequential basis. The market in Bangalore has been fairly strong and stable, compared with Mumbai and Delhi. This will be reflected in the performance of south-based companies such as Sobha Developers, Prestige Estates and Puravankara Projects.
For real estate companies, close to 70% of the construction cost is derived from the expenses on labour and materials like steel and cement. This has moderated and was more or less stable in the June quarter, compared with the preceding quarters. A sharp slide in the rupee is likely to prompt NRI investment in the property market. Regions such as Bangalore, the National Capital Region and Pune would benefit on this count.
The BSE Realty Index has underperformed the Sensex since the end of February 2012. In the absence of any positive trigger, this is likely to continue in the near term. With no sign of price correction in the offing, volume growth is likely to remain poor.
A softening of interest rates and refinancing of loans could help revive demand and enable companies to complete projects and repay debt.
However, with RBI maintaining a cautious stance on rates, debt-ridden realty companies will have to wait a while before they get any reprieve. Analysts expect Mahindra Lifespace, Sobha Developers and Prestige Estates to post moderate to strong growth in revenues for the quarter.
Thank you for sharing this post. It was good to know that India real estate has been doing good in the market. Hope to us posted on updates.
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