While collections from customers, cash flows and sales realisations declined for top developers such as DLF, Godrej Properties and Oberoi Realty in Q1FY21, they along with analysts, are hopeful that these business metrics will pick up in the coming quarters as construction activity improves.
Construction activity almost halted in April and May this year.
And the current financial year is going to be tough for the real estate sector as prospective buyers stay away, analysts and developers said.
Sales collections at DLF, the country’s largest developer, halved to Rs 315 crore in Q1FY21 from Rs 705 crore in Q4FY20.
The firm's operating cash flow before tax and interest also went down 70 per cent during the period.
Analysts said a sequential comparison of business metrics makes more sense as Q1 was hit by covid.
“Construction work stopped during lockdown. But now it has restarted at all sites, achieving 65 per cent of pre-covid levels,” DLF said in a note on Wednesday.
It said business performance was impacted under extremely challenging circumstances, and that revenue recognition has been deferred to subsequent quarters.
The Q1FY21 collections of Godrej Properties, the country’s second largest developer, were Rs 420 crore, or 40 per cent of the pre-Covid levels, spiking net debt levels by Rs 590 crore QoQ to Rs 1,750 crore.
The company’s average sales realisations also went down at Rs 6.094 per sq ft in Q1FY21 from Rs 6,648 per sq ft in Q1FY20 but were higher compared to Q4Fy20 levels (Rs 5,811 per sq ft).
“Collections are normally construction-linked but there is no point in focusing on that when there was no construction in April and May. Now the labour is 60 per cent of pre-covid levels,” said Pirojsha Godrej, chairman of Godrej Properties.
Godrej said debt went up for similar reasons. “Construction was hit. Hence cash flows were lower than last year. They should be close to break-even once construction improves,” he said.
He said the company did not reduce prices during Q1FY21 and numbers are not strictly comparable as different cities carry different prices.
Adhidev Chattopadhyay, research analyst at ICICI Securities said while Godrej Properties’ FY21 operating cash flows may remain weak, GPL remains comfortably placed with cash reserves of Rs 2,200 crore as of June 2020 and hopes to boost FY21 sales bookings on the back of 15 million sq ft launches.
Chattopadhyay said Godrej Properties achieved strong gross sales bookings worth Rs 1,530 crore (up 71 per cent YoY), driven by digital channels, of which 50 per cent was from non-resident Indians (NRIs). About 80 per cent of the quarter’s sales bookings were driven by GPL’s activation scheme across 30 projects wherein a customer pays 10 per cent on booking and 90 per cent on possession, with no bank tie up.
Oberoi Realty, the third largest developer by market cap, also faced headwinds in the June quarter.
It did new sales bookings in Q1FY21 versus usual quarterly run rate of Rs 200 crore to Rs 300 crore.
“We expect FY21 to be a tough year for Oberoi Realty considering its exposure to the Mumbai luxury residential market and continued weakness in malls/hotel businesses,” Chattopadhyay of ICICI Securities said.
“A strong balance sheet with net debt equity of 0.2 times and minimal debt on annuity/hotel assets should enable Oberoi Realty to sail through the transient COVID-19 induced pain,” he said.
In a recent concall with analysts, Vikas Oberoi , chairman of Oberoi Realty, is looking to enter new cities such as NCR and Bengaluru and increase its market share in its mainstay of Mumbai.