Real estate companies may report fall in Q1
The major real estate companies are expected to see their revenues as well as profit decline in the April-June quarter on a sequential basis, according to estimates drawn up by analysts. In fact, for some mid-cap companies the revenues on a quarter on quarter basis could see a decline of as much as 30% on the back of nearly nil home launches.
Earlier this month, real estate consulting firm Knight Frank said that new home launches dropped 22% across the top 8 cities from 22,762 units between January and March to 17,858 units between April and June. Companies have already said that new launches have dropped because the sector is adjusting to the newly instituted Real Estate Regulation Act (RERA).
Sector analysts pointed out that companies have stopped launching new units for the past four to six quarters in a bid to prioritise construction on existing projects, which signals an operationally stronger sector. But since sales are still declining means that developers are not able to sell the apartments they are constructing. A Knight Frank report published earlier this month states, “The baggage of unsold inventory was stilted mainly in the under construction category. However, now ready for possession apartments are also available across markets.”
The lone exception to what is being expected as a sector wide dismal performance is Godrej Properties, which has seen a successful launch of its project in Gurgaon.
Experts said the pain is likely to continue in the sector. Anshul Jain, managing director, India, Cushman and Wakefield, said launches in the residential sector won’t meaningfully improve over the next two to three quarters. “Developers need to make intrinsic changes to their business structure, operations and marketing strategies to comply with RERA norms,” Jain explained.
Once builders come up to speed with the compliance, sales could pick up say experts who point out buyers would become more confident of getting possession on time. RERA has been notified and is in the process of being implemented in two major states, Maharashtra and Karnataka.