Cash-starved real estate companies are expected to see an average fall of 30 per cent in their net profit and a 10 per cent fall in their top lines in the third quarter of FY09 as property developers battle slowing property sales and a tight credit scenario.
Operating profit margins of property companies are expected to fall by a whopping 900 basis points as developers see lower realisations from sales and rentals, higher marketing attempts and deeper discounts which are expected to pull down the margins of realty companies.
Even as the central bank and the government has moved in to ease the credit crunch in the property sector, developers are feeling the pinch as home buyers stayed away from new buys due to falling income and higher interest rates.
According to a Goldman Sachs estimate, after a 21 per cent growth in first quarter of FY09, the profit numbers of realty companies fell 9 per cent in the second quarter as the slowdown deepened in the Indian property market. The fourth quarter will be tougher for realty companies, say analysts.
'Poor demand has led to a fall in sales and slower project execution across segments. Further, despite the onset of price corrections and discounts from developers, demand remains weak,' Religare analysts said in a recent report.
Between the second quarter and the third quarter of the calendar year 2008, residential prices have fallen by 5-10 per cent in the National Capital Region; office rentals have fallen around 15-20 per cent in the NCR between the end of calendar year 2007 and the third quarter of calendar year 2008, according to Goldman Sachs estimates.
DLF, the country's largest property developer, is expected to post a net profit of Rs 1,589 crore (Rs 15.89 billion) in the Q3 of FY09, nearly 26 per cent lower than what it had posted in Q3 of FY08. The company had posted a net profit of Rs 2,145 crore (Rs 21.45 billion) in Q3 of FY08.
The KP Singh-promoted DLF is expected to post total sales of Rs 3,501 crore (Rs 35.01 billion) in the December quarter of FY09, nearly 3 per cent lower than what it had posted in the corresponding quarter last year.
Its operating margins are expected to be at 58.5 per cent, nearly 1,100 basis points lower than it posted in the December quarter of FY08. The company's operating margins stood at 69.5 per cent in the third quarter of FY08. DLF's increased focus towards mid-income housing and slowing sales to its sister company DLF Assets led to this fall, said an analyst tracking the company.
Unitech, the country's second largest developer, is expected to post a net profit of Rs 296 crore (Rs 2.96 billion) in the Q3 of FY09, which is 44 per cent less than what it posted in the corresponding quarter of previous financial year. The company posted a net profit of Rs 526 crore (Rs 5.26 billion) in the third quarter of previous financial year.
The company's total sales are expected to be around Rs 861 crore (Rs 8.61 billion) in the third quarter, which is 25 per cent less than what it posted in the corresponding quarter previous financial year.
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