The sales volume of 15 of the top 25 listed real estate companies by market cap declined 46 per cent to 11.80 million sq ft from 21.85 million sq ft over the last eight quarters, according to a report by real estate consultancy Knight Frank.

The report points to shrinking demand for real estate in the country and the growing pain for developers.

Region-wise market share

“High interest rates and high real estate prices, coupled with uncertain job prospects, deterred end-users from committing themselves to the largest buy of their life,” it says.

Based on the sales volume, the market share of South India-based companies (five out of 25 listed realtors) has increased the most during the last eight quarters.

Being end-user-driven markets and backed by affordably priced properties, Bangalore and Chennai saw their market share rise from 16 per cent in Q4FY-12 to 33 per cent in the December quarter this fiscal.

While North India-based companies (seven in the group) continue to dominate the Indian realty market in terms of volume, their share fell from 75 per cent in January-March 2012 to 51 per cent last quarter.

“Major northern India-based real estate companies have been trapped by huge debt, compelling them to change their strategy. They went slow on new launches and concentrated on completion of launched projects and sold non-core assets to de-leverage their balance sheet. These changes in business strategy adversely impacted the overall share of the region,” adds the report.

The West India-based realty companies (13) regained their lost ground over the eight quarters. Increased launches of affordable projects in the peripheral markets of Mumbai and Pune helped boost the region's market share.

Financial performance

Further in the December quarter this fiscal, these realty companies cumulatively reported a revenue of ₹68 billion, up 1 one per cent year-on-year, highlighting the slow growth in the primary real estate market.

“Delay in approvals, high cost of funds and slow uptick in the sales volume dried up the liquidity for the cash-starved real estate companies, which in turn logjammed the construction activity across India,” said the report.

The last eight quarters have also been quite volatile in terms of net profit and net profit margin.

Net profits of the 25 companies registered a fall of 41 per cent during the last eight quarters, while the net profit margins during the same period fell from 13.6 per cent to 9.7 per cent.

(This article was published on March 28, 2014)
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