Profits of real estate companies dropped in the second quarter of the current financial year as rising input cost squeezed margins and property sales slowed. Analysts expect the coming quarters to be difficult as property sales are likely to fall further.
DLF, the country's largest real estate company, posted a 4 per cent drop in its consolidated net profit for the second quarter of the current year as compared to corresponding quarter last year, due to high input costs and its foray into mid-income housing.
The Gurgaon-based company posted a net profit of Rs 1,935.35 crore for the September quarter of FY09 as compared to Rs 2,018.23 crore it posted in the corresponding quarter last year. However, the profit numbers were in line with analysts' expectations.
The company posted a 15 per cent rise in revenue at Rs 3,744.39 crore (Rs 3,250 crore) for the September quarter as it stepped up sales to a unit owned by the founders.
DLF sold property worth Rs 1,470 crore, or nearly 40 per cent of sales, to DLF Assets, a promoter-owned company, in the second quarter ended September 2008. DLF has been selling properties, both completed and on-going projects, to DLF Assets. The total outstanding due from DLF Assets is Rs 4,800 crore at the end of September 2008.
DLF Assets earlier planned to get listed on the Singapore Stock Exchange as real estate investment trust (REiT) but could not do so because of investors’ apathy towards realty stocks. Now, DLF Assets is planning to raise Rs 5,000 crore by March 2009, said a company spokesperson, but he declined to give further details.
So far, DLF has sold 5 million sq ft of office properties to DLF Assets and plans to double that to 10 million sq ft by end of FY09, the spokesperson said.
Rajiv Singh, vice-chairman, DLF, said, “Our performance has been consistent with our plans, despite tighter liquidity scenario and looming prospects of lower GDP growth.”
Commenting on the company's strategy to beat the slowdown, Singh said, "Reduction in construction costs with softening of raw material prices will help us maintain our margins in challenging times.”
Bangalore-based property developer Puravankara Projects posted over 16 per cent drop in net profit in the quarter due to high material cost and lesser property sales.
The company posted a net profit of Rs 50.47 crore (Rs 60.21 crore) in the second quarter.
Total revenues were marginally down by 1.15 per cent at Rs 139.37 crore (Rs 141.01 crore).
Ravi Puravankara, chairman and managing director, said, "We had to face difficult market conditions and tightening of the economy. Despite this, we have maintained our profit margins this quarter. The company also had to face cost and price pressures in addition to customers preferring to hold their home purchases," Puravankara said.
However realty company HDIL, part of the Wadhawan Group, posted a 16 per cent jump in net profit for the second quarter of this financial year mainly due to cash flows from the Mumbai airport project.
