Real estate developers: trouble in paradise?
Many leading developers are joining the league where sales volume has pushed down, some with marginal increase in net profit, some with no money and no buyers while some with declining profits.
Oberoi realty, Mumbai based real estate company, reported a net profit of Rs 145.2 crore in last quarter of the 2012-13 fiscal against Rs 143.6 crore a year ago. The limited inventory resulted in low sales in the same quarter despite higher realisation per square feet.
If the situation continues in FY14, the company would not be able to launch new projects. Oberoi has not launched any new projects in the past two years due to pending regulatory approvals of earlier projects. With no delay, it has to utilise its idle cash at right place to maintain its advantage over other players.
Another city based realtor, Mantri Realty has not paid its loan interest to SE Investments from last five months. Thus, the non-banking financial company has knocked the doors of court to stop Mantri from selling 32 specific apartments mentioned in the loan agreement.
The matter came into light when on the same day when Mantri announced the launch of its six housing projects in coming three to four months. The realtor is planning to develop total 2,300 flats in Mumbai, Pune, Bangalore, Gwalior and Solapur with an investment of about Rs 1,500 crore.
The net profit of Indiabulls Real Estate in the March quarter reported profit drop of more than seven percent as compared to last year. The tax expenses of the company rose to Rs 22 crore from Rs 76 lakh a year ago.
On one hand, the company witnessed decrease in revenue to Rs 712 crore while on the other hand earnings before interest, tax, depreciation and amortisation (EBITDA) increased. It managed to reduce its inventory better than last year which corresponds more sales.
Mahindra Lifespace Developers Ltd fourth quarter net profit also fell 27.75 percent to Rs 23.2 crore while revenue fell 27 percent to Rs.102.15 crore.
Factors such as declining sales, limited cash flow, tight money market and high interest bank loans are pushing real estate developers into liquidity crisis. This means that despite low sales builders are increasing prices of apartments. Though there is no actual demand in market and the property prices are shooting up? New launches is a means to set developers cash registers ringing but the actual execution of projects might be far away.
The situation is interesting and the common man should definitely take a cautious investment decision.
Related Real Estate News:
Mahindra Developers likely to close 4-5 land acquisitions
Radiance Realty plans a slew of projects in Chennai
Essel launches Rs 500-crore real estate private equity fund
high interest bank loans, Housing projects, Indiabulls Real Estate, Mahindra Lifespace Developers Ltd, Mantri Realty, new launches, new projects, Oberoi Realty, Real Estate Developers, SE Investments
