A small pick-up in sales and a few deals apart, the third quarter does not offer any respite for a dozen listed real estate companies, sitting on an accumulated debt of over R50,000 crore.
However, experts remain optimistic on innovative fiscal management measures from the likes of DLF and Unitech when they announce their Q3 results early next month. The two real estate giants account for 60% of the combined debt pile-up of the listed real estate firms.
According to analysts, the combined debt of the firms has swelled by over 7% on a y-o-y basis ? from around R48,000 crore to close to R51,000 crore. In comparison, their revenues have grown 3%.
Analysts are divided on the debt position of these companies since sales have seen a marginal pick-up in Q3 against the earlier two quarters.
According to Anuj Puri, chairman and country head at Jones Lang LaSalle, the quarter has been more active this year with sale of non-core assets by some realty firms, sales of land banks at discounted valuations, block sale deals at heavy discounts and softer repayment terms for debts, among others, offering hopes of a better show.
However, the debt of these firms have grown by R2,000 crore in each of the previous quarters. Therefore, Q3 may not be too different, says Amit Goenka, national director ?capital transactions, Knight Frank India.
“Though some positive initiatives happened in Q3, the total leverage facing the sector is unprecedented, which may not ease the fiscal position of companies as per their expectations. As of September 2011, the total debt overhang is pegged at about R1.25 lakh crore,” Goenka said.
Echoing similar sentiments, Samir Jasuja of PropEquity said: “Going forward, RBI has hinted of rate reduction. However, banks are wary of new loan disbursals. Therefore, debt remains a hurdle for the growth of real estate firms.?
PropEquity is a real estate data, intelligence and analytics firm. Advisory agencies like Edelweiss have already stated that the top 11 real estate companies have recorded a dip of 22.7% (y-o-y) in their profit, while their revenues grew only 3.1% in the second quarter (July-September 2011) because of the continued pressure of rising input and interest costs, and Q3 may not be any better.
