Realty cos put up mixed performance in Q2FY18, struggle to cope with slowdown

The real estate companies have reported mixed performance during the quarter ended September 2017. Godrej Properties has witnessed 122 per cent YoY growth in the value of sales bookings in Q2FY18 and total sales value stood at Rs 1335 crore.  Oberoi Realty's aggregate area booked for Q2FY18 was 1.73 lakh sq. ft., as against 1.77 lakh sq. ft. booked in Q2FY17. Ashiana Housing has witnessed increase by 4 per cent in booked area compared to previous quarter and lower by 25 per cent compared to corresponding quarter of previous year. However, area constructed was lower by 30 per cent compared to its previous quarter.

However, realty companies are struggling with slowdown in new launches owing to uncertainties related to implementation of RERA (Regulation and Development) Act, 2016, leading to slower new sales. Also, the implementation of RERA has increased compliance costs, which will act as a drag for the industry.

As for the cement industry, despite the sluggish demand for cement, the cement prices are rising because cement companies have passed the additional production cost to the customer. Overall, lower realisation coupled with the rise in cement and metal prices would act as a headwind. Hence, despite the decline in home loan interest rates, realty companies have failed to attract home buyers, which might squeeze the sector further.

The Indian real estate market is expected to touch USD 180 billion by FY2020, with the housing sector alone contributing 5 to 6 per cent to the country's GDP.