Net profit growth in the third quarter earnings of leading real estate firms could be a positive sign but this in itself does not indicate a turnaround for the sector, according to experts.
Major companies DLF and Unitech have posted an increase in their net profit after a gap of almost two years.
DLF recorded 10 per cent rise in its net profit at Rs 285 crore (Rs 2.85 billion) for the third quarter ended December 2012, compared with the year-ago period. Unitech’s net was up 52 per cent at Rs 84 crore (Rs 840 million) for the same period.
Godrej Properties also posted a 24 per cent increase in net profit at Rs 35 crore (rs 350 million) for the third quarter, on the back of successful new launches.
Both DLF and Unitech have been focusing on clearing the backlog and ramping up construction activity.
While the stock market responded positively to the development and industry, too, was upbeat, analysts are cautious.
One will have to wait for at least two more quarters to actually assess the impact, but the slowdown has started bottoming out, they pointed out.
Kim Eng analyst Anubhav Gupta said, “The outlook for the real estate sector has improved as compared to the last six months.
“The slowdown has started bottoming out. There has been some movement with people coming out and buying.”
He said the property prices have become stable. The prices are not increasing under pressure either; so this might give a fillip to the pending buying decisions.
Developers have gone through a lot of stress and are continuing to do so, according to Sanjay Dutt, executive managing director (South Asia) at Cushman & Wakefield, a leading international consultancy.
While the growth in profit of the realty companies is a good sign overall, “there is still a lot of pain left in the sector”, he added.
It’s a step in the right direction, but a lot more effort needs to go into this sector, Dutt said.
More importantly, property prices must come down in certain markets to make things work.
National Real Estate Development Council Director-General R R Singh also echoed similar views.
“There are signs of revival, but the slowdown is not over.
"The slowdown in economy is impacting all the sectors including real estate.
"It will take 6-9 months before things start moving up as it will involve many factors, not just the company’s performance,” he said.
"We are expecting the Budget to provide some positive signs for the real estate sector to grow further,” Singh added.