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Stockwatch: Barring a few exceptions, it’s been a down-hill ride

Meera Siva | Updated on January 27, 2018


Property developers struggled for sales growth and the gloom was widespread

The CNX Realty Index is down over 30 per cent since last February as investors took a bleak view of the sector. Unlike 2014-15, when the gloom was contained to a few markets such as the National Capital Region and Mumbai, the distress was quite widespread last year.

South-based developers, who beat the slowdown blues in 2014-15, did not fare well. Shares of Bengaluru-based Puravankara and Pune-based Kolte Patil Developers are down 40 per cent since February 2015. DLF, the largest real-estate developer, lost 43 per cent in the last year.

Investor sentiments were understandable as property developers struggled for sales growth. Revenue was down over 30 per cent for listed developers such as Sobha during the first nine months of 2015-16 compared with the same period a year ago.

Not even the series of interest rate cuts — 125 bps in 2015 — stoked buyer interest.

Home sales across major cities dropped 4 per cent in 2015, after a 30 per cent fall in 2014, according to CBRE. New launches were down 23 per cent in 2015 compared with a year ago nationally. Even in robust markets such as Bengaluru, residential launches touched a five-year low in 2015, says a report from Knight Frank.

Prices were also under pressure and dropped 25 per cent in large markets such as Gurgaon, notes JLL.

Profits came under pressure as developers moderated prices to boost sales. Earnings dipped 23 per cent during the first six months of 2015-16 compared to the same period a year ago.

Developers also faced cash-flow issues as sales slowed. Debt has been mounting in the last few years, raising servicing challenges.

DLF’s debt increased from ₹20,336 crore in December 2014 to ₹21,396 crore in December 2015. Developers such as Puravankara sold assets to reduce debt and raise working capital. DLF, for instance, is considering a promoter stake sale to raise funds.

Bright spots

Still, a few developers managed to beat the slowdown blues. State-owned NBCC, for instance, witnessed 30 per cent increase in revenue, thanks to steady order flows from the government.

Also, office space demand picked up last year and this helped developers such as Godrej Properties and Brigade Enterprises.

Published on February 12, 2016

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