Q2 Earnings: Developers’ Outlook Will Be Key Sentiment Indicator
Q2 is a seasonally weak quarter due to monsoons and the ‘Shraadha’ period.
Real estate developers’ outlook after the disruption caused by the new housing law and the Goods and Services Tax will be an important sentiment indicator as they announce their quarterly results.
Three months ended September is a seasonally weak quarter due to monsoons and the ‘Shraadha’ period, which is considered inauspicious for buying.
Sales had slowed down after the implementation of Real Estate Regulation Act in May that made it mandatory to register projects and barred builders from transferring a bulk of the funds from one project to another. GST rollout followed in July, disrupting the entire supply chain as distributors of everything from tiles to cement pared inventory ahead anticipating losses.
In the first two quarters of the year ending March 2018, not many new projects were launched barring some joint development programmes by Godrej Properties. The other highlight was the Oberoi Group’s purchase of GlaxoSmithKline’s land, located in Thane, for Rs 555 crore.
Developers are expected to start launching new projects and concentrate on affordable housing going ahead, multiple brokerages said.
South-focused Prestige Estates Projects Ltd. indicated as much. It will unveil new projects in the third and fourth quarters, Chairman and Managing Director Irfan Razack told BloombergQuint. The Bengaluru-based developer will also focus on affordable housing, he said.
Expectations
India’s largest developer DLF Ltd.’s profit is expected to decline 60 percent in the quarter ended September over a year ago. Mumbai-based Godrej Properties Ltd. is likely to be the best performer.
Brokerage View
Here’s what brokerages expect in the second quarter earnings...
Morgan Stanley
- DLF: Update on financial restructuring plan.
- Oberoi Realty: Affordable housing plans
- Godrej Properties: Inventory position in Mumbai business hub Bandra-Kurla Complex.
- Prestige Estates: New sales pipeline
Edelweiss Securities
- Brigade Enterprises and Sobha Developers: Revenue recognition in ongoing projects and new launches.
- Sunteck Realty: Incremental sales in Bandra-Kurla Complex.
- DLF: Stalled sales due to RERA implementation
Stock Market Review
Nifty Realty Index rose 3.8 percent during the quarter compared to 2.8 percent gain in the benchmark Nifty 50 Index.
(Earnings expectations have been complied on the basis of reports by Edelweiss Securities, Morgan Stanley and ICICI Direct)