Unitech Ltd, India’s second largest real estate company, and DB Realty Ltd continued to struggle with sales in the June quarter amid rising interest rates and slowing demand—a seemingly unceasing plight they share with most of the sector.
Unitech’s consolidated net profit dropped 11% over the March quarter to Rs.98.36 crore. DB Realty boasted of a five-fold sequential surge in profit to Rs.41.2 crore but much of this came from its sale of non-core assets.
Experts, however, believe as most realty companies have reported drop in profits, the developers will bank on the festive season to register healthy sales.
Unitech’s revenue for the three months ended 30 June dropped 43.47% to Rs.595.85 crore over the March quarter.
“The company has been able to achieve sales bookings of over Rs.1,000 crore during the quarter in a challenging environment of rising interest rates owing to its attractive product offerings targeted at affordable/mid-income housing segments and intense sales effort,” Managing Director Ajay Chandra said on Friday, August 12.
Unitech’s biggest challenge seems to be delivery with the huge amount of execution challenge they have taken on themselves with 40 million sq. ft under construction. The company sold 1.9 million sq. ft of space for about Rs.1,020 crore between April and June, and has about 90 projects at various stages of construction.
On a year-on-year basis, Unitech’s profit declined 45% on a 28% fall in revenue. It reduced debt by Rs.203.68 crore to Rs.5,300 crore in the June quarter. DB Realty’s profit increased to Rs.41.2 crore from Rs.8.1 crore in the March quarter, largely because it earned nearly Rs.250 crore from selling non-core assets, including a stake sale in a south Mumbai property. Revenue dropped to Rs.221.5 crore from Rs.391 crore in the March quarter.
“Rising interest rates and input costs coupled with delayed approvals have resulted in a slowdown in the sector,” said N. Shridhar, Group Director, business and strategy. Year-on-year, the developer’s profit fell 33% and revenue dropped 16.38%.
Top executives of both Unitech and DB Realty are in jail pending investigations into alleged irregularities related to the allocation of second-generation (2G) telecom spectrum.
Unitech Managing Director Sanjay Chandra is also a Director at Unitech Wireless. DB Realty’s Shahid Balwa and Vinod Goenka were also promoters of Etisalat DB, a joint venture between Abu Dhabi’s Etisalat and DB Group.
DB Realty reduced its debt by about Rs.150 crore in the June quarter to Rs.242.5 crore. Shridhar said the company will reshuffle its portfolio and evaluate the sale of non-core assets to improve margins. Between April and June, DB Realty sold about 594,000 sq. ft of space including transfer of development rights (TDR) at a sales value of Rs.187.6 crore.
