Showing posts with label DLF. Show all posts
Showing posts with label DLF. Show all posts

Tuesday 19 April 2016

Realty firms likely to see muted sales, profits in March quarter

 Property market in Delhi NCR remains under pressure; Mumbai continues to see sales volumes only in select residential projects

Top real estate companies are expected to post muted sales and profits in the January-March quarter compared to a year ago due to limited project launches, tepid cash flows and weak consumer sentiment.
The property market in the national capital region (NCR) remains under pressure, while Mumbai continues to see sales volumes only in select residential projects. Demand for Rs.1 crore-plus houses is weak in Bengaluru and Pune, while mid-income housing continues to see reasonable offtake.
However, even as residential sales remain lacklustre, a key positive that has emerged over the past four quarters is a pickup in leasing activity for office space, especially in Bengaluru.
“New project launches remained subdued during the quarter, with developers focusing on clearing existing inventory rather than launching new projects at a time when demand is sluggish,” said Sandipan Pal, an analyst with Motilal Oswal Securities Ltd.
Some of the launches in the quarter were Godrej Properties Ltd’s second phase of The Trees in Mumbai, Mahindra Lifespace Developers Ltd’s Vivante in Mumbai and Sobha Ltd’s International City in Gurgaon.
“While a general slowdown prevails in real estate markets across the country, NCR remains the worst-affected,” Pal said.
So far this year, the BSE Realty Index has fallen 0.51%. On Monday, it closed at 1,337.41 on BSE, up 4.4% from the previous close. India’s top two developers, DLF Ltd and Oberoi Realty Ltd, are expected to post lower sales and profits for the three months ended March, due to the lack of new launches and limited revenue recognition from projects.
DLF, the largest developer by market value, may see its March quarter net profit fall by 16.5% to Rs.143.25 crore compared to the corresponding quarter a year ago, according to a Mint poll of six brokerages. Its revenue is likely to marginally rise by 3.61% to Rs.2,023.5 crore.
“While DLF’s revenue is expected to be driven by older projects, operationally, we expect a weak quarter in terms of pre-sales with no new launches. Net debt is likely to increase on account of weak operating cash flow. The key monitorable will be update on progress of promoters’ stake sale in the annuity business,” said a report by IDFC Securities Ltd.
DLF recently sought expressions of interest from top global investors to sell a 40% stake in its rental assets arm as it seeks to pare debt. The rental assets arm holds about 20 million sq. ft of leased-out office space and is valued at about $2 billion. Multiple investors are likely to buy stakes in the office rental unit.
Sequentially, DLF is expected to post a drop of 17.1% and 24.4%, respectively, in net profit and revenue, according to the Mint poll.
On Monday, shares of DLF rose 2.4% to Rs.124.95 on BSE.
Mumbai-based Oberoi Realty is expected to post a 14.1% drop in net profit to Rs.88.48 crore from a year ago, while its revenue may see a sharp drop by 31.3% to Rs.235.80 crore.
“Oberoi didn’t have any launch in the fourth quarter, and will see a decline in sales booking on a year-on-year and quarterly basis. The third quarter was an eventful one for Oberoi, which launched its big Borivali project then and witnessed revenue recognition from its Esquire project,” said Adhidev Chattopadhyay, an analyst at Elara Securities Ltd. Quarter-on-quarter, Oberoi Realty may see a 53.1% and 67.9% fall in net profit and revenue, respectively.
Oberoi Realty rose 17.7% to close at Rs.279.85 on BSE after The Economic Times reported that Swedish furniture retailing giant Ikea is in talks with the developer to buy a built-to-suit retail space for more than Rs.900 crore in suburban Borivali. Oberoi Realty told BSE said that no transaction has taken place yet.
Slowdown woes apart, developers also struggled to meet their annual sales guidance owing to delays in approvals, making it tough to launch projects on schedule.
“FY16 is the third consecutive year where Sobha Ltd has missed its annual sales guidance with 3.4 million sq. ft of sales worth Rs.2,010 crore versus guidance for 4 million sq. ft of sales worth Rs.2,600 crore,” said an Elara Securities report. Even Prestige Estates, which had set an annual sales target of Rs.5,500- 5,800 crore for 2015-16, revised it in the course of the year.
While Godrej Properties continued to sell well in projects such as the second phase of Trees, a key monitorable will be if its debt levels remain in check, said analysts. Developers such as Oberoi Realty and Kolte-Patil Developers Ltd, among residential players, have low debt even as sales remain tepid.
Bengaluru-based Prestige Estates and Brigade Enterprises Ltd have robust annuity portfolios mainly due to their office projects, coupled with a strong residential launch pipeline.

Tuesday 12 April 2016

Realty firms miss residential sales guidance for 2015-16

A few developers revise sales target for March quarter; weak demand, delay in approvals seen as reasons for slump



Bengaluru: Real estate developers struggled to meet their residential sales guidance for the year 2015-16 due to tepid consumer sentiment and delays in securing project approvals.
Unable to launch projects and sell in line with expectations, a few realty firms even revised or downsized their sales targets in the March quarter.
While real estate developers in Mumbai and Bengaluru selectively launched projects in the last fiscal year, most in India’s largest property market—the National Capital Region centred on Delhi—refrained from bringing more new supply into the market—causing sales to shrink.
Bengaluru-based Prestige Estates Projects Ltd, which generated about Rs.5,030 crore of sales in 2014-15, includingRs.1,000 crore of rental income, is expected to have clocked a little above Rs.3,000 crore in 2015-16.
Prestige Estates, which had set an annual sales target ofRs.5,500- 5,800 crore for 2015-16, revised it in the course of the year.
PrestigeGroup’s chairman and manaing director Irfan Razack said the approval delays and the inability to launch projects in Chennai and Hyderabad affect- ed the sales momentum.
“We are happy with the numbers in the current environment, and we would be the highest to generate such sales in the current environment,” Razack said.
In the April-December period, Prestige launched just 3.8 million sq.ft of the full year’s target of 12 million sq.ft and met just 33% of the Rs.5,800 crore sales target. However, with three residential launches in the March quarter and one commercial project seeing good response, the company is targeting more than Rs.1,000 crore of sales bookings in the last quarter and Rs.3,000 crore for FY16, according to an Elara Securities India (Pvt.) Ltd report.
Prestige did not give out exact numbers due to the impending results.
Another Bengaluru developer, Sobha Ltd, last week said it has registered new sales of 3.38 million sq.ft, valued atRs.2,012 crore, 3.2% higher than its 2014-15 performance, in a scenario where demand remained muted in almost all property markets in the country.
Sobha’s affordable housing brand Dream Acres emerged as its fastest selling product.
An Elara Securities report said that “FY16 is the third consecutive year where Sobha Ltd has missed its annual sales guidance with 3.4 million sq.ft of sales worth Rs.2,010 crore versus guidance for 4 million sq.ft of sales worthRs.2,600 crore. This was largely owing to continued delay in approvals for new launches (Kochi, Chennai and Gurgaon), slowdown in the Rs.1 crore-plus segment and sustained weakness in the Gurgaon market.”
“Most developers missed their sales guidance last year, but 2016-17 is expected to be much better. Developers in Bengaluru such as Sobha and Prestige have a strong pipeline of launches, and that will naturally boost sales numbers. We expect NCR to remain slow and Mumbai will be mixed bag where some developers will sell well,” said Adhidev Chattopadhyay, real estate analyst at Elara Capital.
On a pan-India basis, Mumbai-based Lodha Group again seems to have hit the highest sales numbers, crossingRs.8,000 crore in gross sales—far ahead of Prestige Estates and Godrej Properties Ltd (GPL). GPL generated sales of about 4,422 crore in the first three quarters of FY16. The company didn’t disclose full year numbers. Lodha Group, which beat India’s largest developer DLF Ltd and Prestige in 2014-15 to clock the highest new residential sales of Rs.7,800 crore, had set an ambitious target of Rs.9,000 crore for 2015-16.
Lodha Group’s 40-acre residential project Amara in suburban Thane was the largest contributor towards sales last year. In the past month or so, it has clocked 1,500 apartment bookings that would amount to Rs.1,300 crore. In total, in 2015-16, Amara contributed nearly Rs.3,000 crore, followed by Palava, a township near Mumbai which generated another Rs.1,200 crore.
“The product, brand and price are the three things that played important roles in generating this kind of sales. We have also been able to significantly improve the net to gross ratio without sustained consumer-centric approach,” said Prashant Bindal, chief sales officer, Lodha Group.
While the gross sales typically indicate customers who have paid the booking or the signing amount, net sales would mean when a customer actually makes the initial 20% payment.
Pune-based Kolte-Patil Developers Ltd, which had set a target of selling 3-3.5 million sq.ft of residential space, revised it to 2-2.5 million sq.ft in the last quarter, Elara Capital’s Chattopadhyay said.
In 2015-16, DLF is expected to match the level of 2014-15, when it clocked sales of about Rs.3,850 crore, said analysts.
DLF’s chief executive Rajeev Talwar said that there was a visible rise in customer enquiries. “Customers are gradually coming back. In the last 5-6 years, developers only launched residential projects leading to a lot of supply in the market and this will take time to be absorbed. But... the new financial year will definitely be better in terms of buyer sentiment,” Talwar said.

Wednesday 2 March 2016

DLF pushes ahead with REIT listing plans

SuncapitalCountry’s largest real estate firm by market capitalisation is gearing up to launch REITs worth up Rs6,000 crore in two tranches over the next two years

DLF is currently putting together commercial office assets totalling around 25 million square feet of land into the REITs portfolio
Mumbai: Pushing a step closer to launching India’s first Real Estate Investment Trust (REIT), real estate firm DLF Ltd expects to complete forming a special purpose vehicle (SPV) within the next six months, said a top company executive of the Delhi-based company.
“We would be ready with the SPV in the next six months. As we announced earlier, we have signed non-disclosure agreements with 25 global investors. We should be the first one to crack it (REITs),” Rajeev Talwar, chief executive officer (CEO), DLF Ltd, told Mint over the phone.
Country’s largest real estate firm by market capitalisation is gearing up to launch REITs worth up Rs.6,000 crore in two tranches over the next two years.
REITs are listed entities that primarily invest in leased office and retail assets, allowing developers to raise funds by selling completed buildings to investors and listing them on stock exchanges as trust. Investors earn return on investment either through value appreciation or rental income generated from commercial assets.
REITs will also give overseas investors a chance to invest in lease rental generating assets, an asset class otherwise prohibited for foreigners.
DLF is currently putting together commercial office assets totalling around 25 million square feet of land into the REITs portfolio. As part of the process, promoters of DLF have decided to sell around 40% of its stake in DLF Cyber City Developers Ltd (DCCDL), a rental arm of the company to institutional investors. DCCDL earns around Rs.2,200 crore a year from rentals.
“Basically what is going on right now is divestment (of commercial portfolios) and to get foreign investors into the REIT portfolio. They have to come in the fair market valuation. In the first two quarters of the year, we would have brought all the funds and complete with our first stage which is to form an SPV,” Talwar said.
The listing of REITs, which many believe would bring stability and attract funds to the sector, has not been able to take off mainly due to tax hurdles.
Finance minister Arun Jaitley in the Union budget on Monday proposed to exempt REITs from the purview of dividend distribution tax (DDT), removing a significant hurdle to floating it in India.
“Exemption of DDT on REIT along with the FDI (foreign direct investment) policy changes in December last year will help get huge inflows from foreign institutional investors. For foreign institutional investors, the taxation was making it a lower return product for them. Now this (exemption) increases return and thereby attract more inflow of funds,” he said.
Anuj Puri, chairman and country head of JLL India, said with the proposal to remove DDT, REITs would become a realty soon with few listings likely to happen this year either by financial institutions or developers.
“Currently, around 229 million sq. ft of office space can be seen as REIT-compliant. If we assume that even 50% of these get listed, we are looking at a total REITs listing worth $18.5 billion,” Puri said.
Sun Capital Advisory Services

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