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With the US and European debt crisis affecting sentiments across the world, the Indian real estate sector is likely to see a gloomy phase in the next 12 months and developers would face liquidity crunch, low sales and pressure on margins, consultant Jones Lang LaSalle said.
The country's leading realty consultant pointed out that the projects would be delayed, unsold housing stock will rise and developers might have to offer new projects at 10-15% discount, all because of a slowdown in property demand.
"The US and European debt worries have added to the uncertainty... With the escalating global liquidity issues, these are challenging times. Over the next 12 months, we definitely expect these sentiments to reflect in the financial profile of the Indian real estate sector," Jones Lang LaSalle India Managing Director (West India) Ramesh Nair said.
He said the banks would further tighten lending to realty sector and disbursal rate of home loans is bound to reduce.
"Developers will be under pressure to reduce their debt-to-equity ratios. Fund raising through the QIP route will reduce, and we are going to see a decrease in real estate IPOs," Nair said.
In order to generate funds, the consultant said many developers will sell their non-core land and divest their stakes in non-core businesses such as hospitality and retail.
"This is an unsettling time for the market, and obviously for real estate investors as well. Are we looking at 2008 all over again?" Nair said, referring to the global economic slowdown in 2008 that had hit Indian realty sector badly.
The consultant observed that high interest rates, increase in vacancy and demand slowdown will impact the earnings of developers leading to a slowdown of construction activity and delay in project delivery.
The margins of realtors would also be affected due to increased construction costs, Nair said.
"We are likely to see pre-launch projects coming with at 10% to 15% discount, over the pricing of other projects in the same areas," he added.
Besides, the distressed projects of smaller developers will be acquired by medium-to-large players at prices significantly lower than their original valuations.
"The only constant is change. This has been an axiomatic truth for the Indian real estate market over the last 24 months, with volatility having become a byword to describe it.
There has been little or no respite from this state of flux," Nair said.
DLF stock price
On November 30, 2015, at 12:13 hrs DLF was quoting at Rs 113.70, down Rs 0.4, or 0.35 percent. The 52-week high of the share was Rs 179.00 and the 52-week low was Rs 93.00.
The company's trailing 12-month (TTM) EPS was at Rs 4.33 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 26.26. The latest book value of the company is Rs 96.63 per share. At current value, the price-to-book value of the company is 1.18.
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