New Delhi: DLF Ltd, India’s largest property developer, said second-quarter profit fell 11% as home sales slowed and the company’s cost of funds increased.
Net profit dropped to Rs 372.41 crore in the quarter ended 30 September from Rs 418.38 crore during the year earlier, the New Delhi-based company said in a statement. Revenue, however, increased 6.9% to Rs 2,532.41 crore.
File photo (Bloomberg)
Real estate analysts had expected a drop in company’s profit in the second quarter because of declining sales volumes in India’s prime markets, including Delhi-NCR, Mumbai and Bangalore, high interest rates, high debt, and a lack of financing options. Smaller rivals including Omaxe Ltd and Parsvnath Developers Ltd have also reported a drop in their profits for the second quarter.
Finance charges rose 21% to Rs 526.30 crore in the September quarter, the company said. Tax expenses also doubled to Rs 147.49 crore.
“The real estate sector has been plagued by tight liquidity and a lull in the physical market,” according to a report by brokerage firm Motilal Oswal Securities Ltd published in October.
Lower sales will eventually lead to a rise in inventory levels, putting further pressure on the real estate firms to service their debt.
“We expect volumes to remain subdued over the next one year on account of delays in government approvals and an affordability issue due to higher realty prices and rising interest rates on home loans,” Param Desai, an analyst at Nirmal Bang Equities Pvt. Ltd, a Mumbai-based brokerage, wrote in a note to clients in October.
Desai said DLF’s key residential projects such as NTC Mills (Mumbai) and Chanakyapuri (Delhi) have been delayed because the company couldn’t secure government approvals.
The company, however, got relief on Wednesday when the Competition Appellate Tribunal stayed a Rs 630 crore penalty imposed by the Competition Commission of India over the alleged abuse of its dominant market position.