Arab Today, arab today tough economic times hit indian property firms
Last Updated : GMT 14:59:17
Arab Today, arab today
Arab Today, arab today

Tough economic times hit Indian property firms

Arab Today, arab today

Arab Today, arab today Tough economic times hit Indian property firms

Mumbai - AFP

India\'s real estate sector, which soared as the country\'s economy took off and higher incomes led to increased demand, is facing turbulent times as interest rates push up the cost of home loans.A succession of rate hikes has prompted prospective buyers to delay purchases, with the situation having a knock-on effect on the country\'s top property firms.Stocks of leading firms like DLF, Unitech and DB Realty hit year-lows this month, on weak earnings and amid growing concerns over the global economic recovery after the US credit downgrade and ongoing eurozone debt crisis. The realty index on the Bombay Stock Exchange has halved in value from a year ago and many firms have seen their share price plunge after details emerged of an alleged loans-for-bribes scandal last October.Analysts say that the immediate outlook does not look rosy for property firms, with another rate hike expected before the end of the year, spiralling fuel, labour and raw material costs, and a slowdown in economic activity.\"(Home) sales are not moving at the expected pace. On the other hand, debt and costs burdens have increased for some developers,\" said Neeraj Bansal, director at global consultants KPMG in India.\"The outlook for the sector looks tight,\" he told AFP. On Friday, Mumbai-based DB Realty gave the latest indication of the health of the sector, reporting a 33 percent fall in profit year-on-year to 411 million rupees ($9.03 million) for the three months to the end of June.\"Rising interest rates and input costs coupled with delayed approvals have resulted in a slowdown in the sector,\" group director N. Shridhar said. DB Realty has seen its share price nosedive from a high of 474.9 rupees in September last year to a low of 66.00 in May after boss Shahid Balwa was arrested in connection with a high-level corruption probe. It is now trading just above its lows at 68 rupees. New-Delhi-based DLF has shown a fall in quarterly net profit for four straight quarters, hit by a sharp rise in interest payments on loans and increased expenditure which outweighed gains from property sales.The company has called the current environment \"difficult\", reflecting wider concerns among business leaders that government and central bank efforts to rein in spiralling inflation are hitting investment and growth.In Mumbai, India\'s most expensive market, residential sales dropped to a 30-month low in the first quarter of the current financial year to June, according to Liases Foras Real Estate Rating and Research.Experts predict that the cost of prime real estate could match prices in London, but with demand outstripping supply in the residential sector that makes up 80 percent of the Indian property market, something will have to give. \"Developers will have to start reducing unrealistically high prices to boost sales,\" said Pramod Gubbi, of brokerage Ambit Capital.The Mumbai Mirror newspaper said on Saturday that not a single sale has been made at one luxury apartment block in south Mumbai, despite the 3.5-billion-rupee development being available to buyers for five years.Developer Ravi Vaswamni was quoted as saying: \"There is often trouble in the sale of high-end properties... People are making an investment of a lifetime to buy a house here and it can take some time.\"DLF says it is repositioning to focus on so-called \"plotted developments\" -- parcels of land in gated communities that can be sold without being fully developed -- instead of group housing projects, to improve growth.With less construction activity for the developer, sales of plotted developments can be completed quickly, improving cash flows. DLF said it had 52 million square feet (4.83 million square metres) of land under development and sold 1.9 million square feet in the April-June period. It plans to sell 12 million square feet of residential land in the current financial year\"DLF may book these levels but we expect flat growth in volumes in fiscal year 2013,\" said Sharan Lillaney, of Angel Broking.

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