With home loan rates softening, developers are pinning their hopes on residential demand for the revival of real estate industry
Despite the sector witnessing a slowdown, residential demand continues to hold fort these companies. Big developers are bullish on demand for residential property and are going ahead with plans to launch several projects in 2012-13 as they expect sales to get better than the previous financial year.
Large developers across the country such as HDIL, Godrej Properties, Sobha Developers, DLF and Oberoi Realty, are pinning their hopes on residential demand. Further, softening of interest rates of housing loan is boosting consumer confidence.
Hariprakash Pandey, vice president, HDIL, told FC Build the company plans to add around six-eight million sq ft space as it plans to launch all residential projects in 2012-13 with an investment of around Rs 500 crore for the expansion.
“We have already got initial approvals for a township project in Virar and are waiting for some further approvals to enhance the FSI for that project. That project will be anywhere around 40 million sq ft and will be launched in a phased manner. It will be one of the largest projects spread across 400 acres in Virar. We hope that this project will start in the next two-three quarters and will start building positive cash flow to us,” said Pandey.
Apart from this, the company has recently launched a project in Noida, HDIL Imperial County. Going forward, the company plans to launch one more project in Ghatkopar property, which has been due for a while because of many policy changes with respect to fungible FSI, 0.33 FSI changes in DCR regulation, said Pandey.
Godrej Properties plans to launch around 15 projects in 2012-13 and Oberoi Realty expects to develop around 33-lakh sq ft in this financial year.
The country’s largest developer DLF is planning to develop around 10-12 million sq ft during the same period.
However, equity analysts tracking the sector are not so optimistic. Surojit Pal, an analyst at Elara Capital, said, “While Oberoi Realty has enough cash, Godrej Properties has an asset light model and are mainly doing projects through joint development. DLF and HDIL are in a tight position and the companies are planning to reduce their high debt. At present, sales are low and going forward, I don’t see any quick revival in the near future.”
Pirojsha Godrej, managing director and chief executive officer, Godrej Properties, said, “Last year, we had launched five projects but this year, we plan to launch around 15 projects in the 12 cities we are already present as we are bullish about the residential demand.” Most of them are residential and will be funded through internal accruals and partly through debt. At present, the company has debt-equity ratio of 1.06.
Godrej said in January-March, the company’s Ebitda margins declined to 25.4 per cent against 27.3 per cent year-on-year. “We have increased our property prices and our sales have also gone up. But our input costs have increased significantly.” Cost of labour, steel and cement have gone up, he said, adding that the rise in input cost is hurting company’s margins.
A senior DLF official said the company plans to develop around 10-12 million sq ft of space in 2012-13. “Most of the projects will be residential. We plan to launch them in the existing 18 cities we are already present,” said the official. DLF plans investment for the projects through internal accruals and cash flow generated from existing projects and new project launches. “Every month, we generate cash of around Rs 500-600 crore through our sales,” said the official.
Vikas Oberoi, CMD of Oberoi Realty had earlier said, “We will launch around 33 lakh sq ft of property within this financial year which is expected to be completed in the next couple of years. These properties will generate revenue of around Rs 5,000 crore for us when sold.”
The company plans to launch a project each in Mulund, Worli and the third phase of Oberoi Exquisite in Goregaon-east. These properties in Mumbai will aggregate to 33 lakh sq ft of space. While the Mulund and Goregaon developments will be residential projects, Worli will be a high-end luxury project with mixed-use residential and commercial components.
Oberoi Realty, at present, has no plans to raise funds and would use its cash balance for the construction of the properties. As of the year ending March 2012, the company had cash balance of around Rs 1,300 crore with zero debt. Oberoi claimed that they have increased property prices by around 10-15 per cent from March 30, 2012 to pass on input costs to consumers.
In the southern part of the country also residential demand continues to be strong and developers are trying to tap the opportunity.
JC Sharma, managing director, Sobha Developers said that the company plans to launch around six million square feet in this financial year across various regions. “These projects would take around three years to get completed and cost of construction would be around Rs 2,500 per sq ft,” Sharma added.
According to a Knight Frank report, Bangalore and other southern regions has typically been an end-user driven market with moderate price appreciation. Stability in the market, as well as minimal speculation, has been driving the end-users to proceed with their purchase decisions.
The report said demand for residential units has been more evident in the mid-end category, primarily towards the Southern and the Northern micro-market where majority of the affordable projects are located.
During 2011-12, Bangalore witnessed the launch of approximately 9,700 units, which are scheduled to be completed in the next two-three years. Despite global uncertainties looming large over the horizon, the city held on to the residential prices in 2011-12. As a matter of fact, a number of prominent projects were launched during the period, signifying minimal impact of the economic turmoil on the sector.
The economic recession in the country had put on hold a number of projects launched during 2011-12, thereby increasing the supply pipeline.
Of the total upcoming supply in the residential market, the southern region will account for a significant share of around 54 per cent. Notable projects underway in the region include Forest View by Sobha Developers, Mantri Premero by Mantri Group, Purva Highland by Puravankara and Brigade, said the report.
jharnamazumdar@mydigitalfc.com
Source:wrd.mydigitalfc.com
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