Mid-Cap Real Estate Firms Expected to Post Mixed Trend in June quarter

Mid-cap real estate firms are expected to post a mixed trend as spiraling prices hit affordability and new launches tapered in the April-June quarter. A Reuters’ poll of brokerages estimates Anant Raj Industries to post a 47.79 percent fall in net profit, Housing Development and Infrastructure a 49.26 percent rise and IndiaBulls Real Estate a 114.44 percent rise.

“There would be a year-on-year growth, because of the low base (of previous year). Secondly, margins will go down as product mix has changed, with lot of sales happening in mid-income sector, where margins are lower…,” Param Desai, analyst at Angel Broking, told Reuters.

Apartment registrations in Mumbai fell by 25 percent month-on-month in May to 5,337, the lowest in last 11 months. The decline is largely due to high property prices, which adversely affected affordability, he said.

The National Capital Region, the other large real estate market, also experienced a similar trend, a Mumbai-based analyst, who declined to be named, said. Prices were higher by 15-60 percent in Mumbai during the quarter from that a year ago, while prices in NCR were higher by around 35-50 percent during the quarter, he said. Traditionally, April-June is a “subdued” quarter with no new launches due to the rainy season, Angel’s Desai said.

Property absorption in India’s key metros registered a mixed trend in April-June. The quantum of new launches tapered down in comparison to that in second half of FY10 and the same quarter last year, Religare Capital Markets said in a note to clients. In Mumbai, absorption declined month-on-month, as spiralling prices hit affordability, whereas southern cities and places like Gurgaon registered an uptick in absorption, it said.

Companies like HDIL, Lodha Developers and Anand Raj Industries had key launches during the quarter. “We believe that our real estate universe may deliver some negative surprises in Q1FY11, given the absence of significant new launches and overall low construction activity because of the heat wave in north India,” Religare Capital said. It expects Phoenix Mills and Indiabulls to “surprise positively”.

A Mumbai-based analyst said that developers were focusing on execution of projects, which have been pre-sold. This would help in bringing in revenues, based on a percentage of completion method, in the quarter. “With a robust economy and job market, we expect prices to remain robust and underlying demand steady (quarterly variations not withstanding)…,” Edelweiss Securitied said in its outlook for 12 months.

There is an increase in construction activities, while non-resident Indian investors and speculators are returning to property markets, it said. Stability in residential prices is expected (with an exception in certain markets) and an up-tick in commercial segment is expected by FY’11-end, Angel Securities said in its note.

News Published Under:   Bangalore, Chandigarh, Chennai, Delhi, Faridabad, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida, Property Prices, Pune, Real Estate Developers, Real Estate India, Real Estate Trends |

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