Two of India?s largest listed real estate developers, DLF and Unitech, together had 16.1 million square feet of unsold space at the end of second quarter ending September 30, 2012, an analysis of the last 14 quarters of launch and sales cycle of these two companies showed. This would mean that the total unsold stock with these two developers alone will take about a year and a half to get cleared, going by the pace of sales seen in the last three financial years, and the two quarters this fiscal.
The unsold space, however, is not alarming, consultants said, as it also includes space that is under construction, and it is usual that unsold stock of the previous year gets spilled over to the following year. According to market estimates, there is around 300 million sq ft of real estate space launched annually in India. Of this, say 75% gets sold in the same year, while the rest gets carried forward.
At the end of the fourth quarter of 2010, DLF had an unsold stock of 10 million sq ft, which then fell to 3 million sq ft at the end of the fourth quarter of 2011, as the company did not add any significant supply, and part of the previous year?s backlog got sold off in the next year.
Over the last year and a half, DLF has been prudent with new launches and appears to be clearing off whatever it launched. However, despite efforts, it continues to have, on an average, about 10% stock unsold at the end of each quarter.
For the quarter ended September, DLF saw a 63% fall in its consolidated net profit to R138.51 crore compared with a year ago as the company?s sales dropped. DLF?s revenues fell 19% to R2,039.54 crore during the quarter. DLF, struggling to pare its huge debt pile, is in the process of selling off its non-core assets.
?Generally, it is difficult to say accurately how much is the unsold stock because sales also include stock that got carried forward from previous periods,? said Ashutosh Limaye, head (research), Jones Lang LaSalle India. His views were not specific to DLF.
Unitech, on the other hand, has about 25% of unsold stock on an average at the end of each quarter. The company will take about 4.5 quarters to clear its unsold stock at the end of September 30, 2012.
?This much of unsold space should not be an issue for these developers,? said Poonam Mahtani, national director (residential services), Colliers International, a global real estate consultant. ?There is a lot of stock launched in the market, but not everything gets taken up in one go, and gets built only over a period of time.?
Both DLF and Unitech did not respond to emails sent to them till the time of going to press.
Unitech saw its net profit fall 47% for the quarter ended September 30 compared with a year ago while net income fell 21%.
Home sales in most real estate companies has been bearish over the last two years. Reeling under the pressure of high interest rates, customers have been holding on to their purchase decisions while in some cities like Mumbai, Pune and Delhi, approvals for projects took longer.
Although there have been a few quarters where sales improved due to festival season or a sudden rush to buy property from customers, this has not made any significant contribution to overall sales.
Bangalore-based Sobha Developers, for example, after seeing its unsold stock jump by about 54% in March 2012 from December 2011, has seen the unsold stock deplete by a mere 9% in September 2012 (compared with March 2012). This is despite Sobha garnering its highest ever new sales of 9.5 lakh sq ft during September 2012 quarter.
Apart from residential, DLF, Unitech and Sobha have presence in commercial and retail space as well and the stock takes into account these segments too.
