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Realtors put launches on the back burner

Last updated on: June 4, 2012 16:43 IST

Pulled down by their muted bottom lines and a slowing economy, real estate developers are going low on new launches.

Clearly treading the path of fiscal consolidation, their focus is on completion of projects in hand.

DLF Ltd, India's largest real estate developer by market capitalisation, which recorded a 33 per cent net profit fall in the January-March quarter and 26 per cent fall in full 2011-12, stated in its post-result analysts' call that no numbers could be given for new launches during the first half of 2012-13.

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Realtors put launches on the back burner

Last updated on: June 4, 2012 16:43 IST

The biggest launch for DLF -- the second phase of Magnolias project in Gurgaon at an estimated value of Rs 1,500 crore (Rs 15 billion) -- is slated for the second half of the current financial year.

Asked why DLF had been stuck at a launch range of 10 to 12 million sq ft over the past few years and when it planned to go to the next level, Ashok Tyagi, chief financial officer, said in the analyst's call: "There's no point thinking of the next level at this point."

Citing the slowing economy, a challenging interest rate regime and labour shortage, Tyagi said the company was aiming at a higher sales revenue of Rs 6,500 crore (Rs 65 billion) this financial year, up from Rs 5,200 crore (Rs 52 billion) last year.

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Realtors put launches on the back burner

Last updated on: June 4, 2012 16:43 IST

He added in this scenario, "except for super luxury projects like Magnolias, there's nothing much that one can do".

While DLF plans to launch a couple of projects, including plotted development, in Gurgaon and Chandigarh through the year, the focus will be on delivery of the existing projects across the country to create goodwill among customers and reap its benefits in the subsequent launches, the company presentation said.

It expects to deliver 10-12 million sq ft in 2012-13.

The top management of the company also pointed out in the analyst call that DLF would have to closely watch the economic conditions before project launches.

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Realtors put launches on the back burner

Last updated on: June 4, 2012 16:43 IST

It launched two group housing projects, Regal Gardens and Primus in New Gurgaon in March 2012. DLF's debt stood at Rs 22,725 crore (Rs 227.25 billion) as on March 31. 

Unitech Ltd, another real estate developer that reported a net profit of just Rs 2 crore (Rs 20 million) in the fourth quarter of 2011-12, also aims to focus on execution and delivery for now.

There have been no major launches by the company in the first two months of 2012-13, and nothing big is scheduled for the next one or two months as well.

Unitech recorded a steep 97.7 per cent fall in net profit in the March quarter.

The company launched only 0.64 million sq ft in the quarter. In 2011-12, it delivered just 3.5 million sq ft area.

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Realtors put launches on the back burner

Last updated on: June 4, 2012 16:43 IST

Unitech plans to deliver nine million sq ft this financial year, it said after announcing the results.

Another realtor, Parsvnath Developers Ltd, which recorded a Rs 23-crore (Rs 230-million) net loss in the March quarter, also plans to focus on execution rather than on new launches.

"Increase in the cost of material, high interest rates and unavailability of funds for the real estate sector have affected our business adversely, both in terms of top line and the bottom line", said Pradeep Jain, chairman, Parsvnath Developers.

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Realtors put launches on the back burner

Last updated on: June 4, 2012 16:43 IST

Emaar-MGF, which went aggressive on launches like others a few years ago, is yet to deliver many of its projects.

However, now, it plans to concentrate on delivering the already launched projects, some dating back to 2007.

Samir Jasuja, founder and chief executive officer at market research firm PropEquity, said in the last few months, developers have launched fewer projects as the macro-economic condition in the country has deteriorated.

"Slowing economy, rising rupee, high inflation, expensive funding with highly leveraged balance sheet have slowed down housing and investor demand considerably," he said.

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Realtors put launches on the back burner

Last updated on: June 4, 2012 16:43 IST

For instance, in January-March, Mumbai got a fresh supply  of only 23 new projects (adding up to approximately  3,000 units amounting to 2.7 million sq ft), compared with 95 new projects (adding up to approximately 10,000 units amounting to 13.2 million sq  ft) during the same period last year.

"Developers are now focusing on executing their existing projects to improve cash flows," Jasuja added.


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