DELHI/MUMBAI: India's top listed real estate firms have reported a sharp drop in sales in the quarter to September as high prices and continued economic uncertainty kept home buyers away.
Sales fell 40-70% at realty heavy weights such as DLFBSE 0.30 %, Oberoi RealtyBSE -1.44 %, Orbit Corp and Godrej Properties. Heavy discounts offered by developers during the festive season that began in October did push the sales but only a little.
"Mumbai-based real estate companies are seeing acute pain in terms of sales with volumes dropping 40-50% year-onyear," said Amit Agarwal, senior analyst for real estate at SBI Capital Securities. "Gurgaon-based firms are also struggling, and this is likely to continue for some more time."
Oberoi Realty, a real estate developer focusing mainly on properties in and around Mumbai, saw sales drop 69% in the September quarter over the year-ago period, while Godrej PropertiesBSE 2.44 %, also based in Mumbai, saw a decline of 68%. The developer has cited "weak market conditions" and lack of new launches as the reasons for the drop.
DLF, the country's biggest real estate player, said sales fell 43%, while Orbit Corporation said it could sell only 20,000 square feet of space during the quarter. Analysts said the impact of this weak operational performance will be visible in the financials of these companies in the coming quarters, as according to accounting standards, companies cannot show these sales in the financials until at least 25% of a project is complete.
"The situation is becoming worse with each passing quarter. If developers drop prices further, we might see some pickup in sales," said Ashutosh Limaye, head of research at property consultancy Jones Lang LaSalle.
"GDP is going down, savings are going down, interest rates are climbing but the prices have remained where they are. Because of these reasons, we expect sales to continue to remain weak," said Prakash Agarwal, real estate analyst at CIMB. Real estate firms, however, say there was some improvement in October.
"The onset of festive season has brought about a gradual improvement in market demand and we are hoping it will improve even further," said R Nagaraju, chief financial officer at UnitechBSE 1.76 %. Brokers, however, are not as optimistic.
"Sales did improve in October but only compared to the previous quarter," said Samarjit Singh, managing director at IndiaHomes, a property broking firm.
In India, half of home sales every year happen during the three festival months, but this year even the festive season sales are likely to be well short of the target. "End-users are buying but only because developers are offering discounts of up to 12%. Compared to last year, sales are still down considerably," said Abhay Khemka of Gurgaon-based Khemka Investments and Properties.