Developers claim that they are reporting good sales across the country. What do their financial results indicate?

Property prices are shooting up in almost all realty projects across Mumbai, Delhi and Bengaluru, but are the properties actually selling at such high prices? After the March 2010 quarter results, most listed developers were quoted in media reports claiming that they were satisfied with the annual sales growth over the past fiscal.

However, the numbers portray a mixed bag of results. If we compare the operating profit of FY09-10 versus FY08-09, of a few listed real-estate companies, this is the picture that emerges. DLF Ltd has reported a fall of 36% in operating profit (FY10 was at Rs1,109.61 crore; FY09 at Rs1,721.58 crore), Sobha Developers Ltd has reported a drop of 6% in operating profit (FY10: Rs254.5 crore; FY09: Rs269.7crore), Parsvnath Developers Ltd reported 5% annual growth (FY10: Rs233.31 crore ; FY09: Rs221.24 crore).

Only Orbit Corporation Ltd has bucked the trend and reported 71% growth in operating profit (FY10: Rs154.87 crore; FY09: Rs90.43 crore).

Unitech Ltd and Omaxe Ltd have not declared their annual results for the last fiscal ended March 2010. We decided to compare their results of FY08-09 with the performance for the first nine months of the last fiscal, ending December 2009.

Unitech Ltd reported a drop in operating profit of 23% (FY08-09: Rs1,047.41 crore; annualised performance for nine months ended December 2009 at Rs808.08 crore) while Omaxe Ltd reported a growth of 42% (FY08-09: Rs135.65 crore; annualised nine months: Rs192.51 crore).

“One of the major reasons for de-growth is that developers are initiating new construction when the corresponding sales are not happening. Developers are failing to report incremental sales. They are just holding on to high prices without being bothered about sales,” said Aditya Bansal, vice president (finance), Liases Foras.

There have been a few places in metros like Mumbai and Delhi, where a few residential properties have been sold for almost Rs50,000 per sq ft. However, this does not indicate that consumers are buying property at these hugely inflated rates—Moneylife has consistently reported on how developers are not being able to sell real estate at current rates.

“As for the quarter ended March 2010, prices have gone up further by 15%-20% and we are estimating sales to be down further by 25%-30%. Property prices are (now) indicating the rise of another asset bubble,” said Pankaj Kapoor, founder, Liases Foras. — Moneylife Digital Team