Developers may have been gung-ho about an increase in sale volumes, but the second quarter performance for the real estate sector is far from euphoric. Posting a marginal increase in revenues quarter-on-quarter, companies continue to focus on fund raising and reduction of debt. CNBC-TV18's Priyanka Ghosh summarises the quarterly results.

Since Q1 of the current financial year, realty prices have been on the upswing, with some companies revising prices upwards by 20-30%. But that has not stopped them from clocking in better sales quarter-on-quarter.

Earnings reveal Unitech has sold 10 million sq ft of the 21 million sq ft launched in the first half of FY10. HDIL has sold 90% of the 2 million sq ft launched. Bangalore-based Sobha Developers witnessed a jump of 57% in their sales.

But in Q3 prices are likely to stabilise as developers fear a constant uptick may spoil the party. JC Sharma, MD, Sobha Developers says, "On the pricing front, the worst is over. We are not thinking of increasing prices, but the comfort of prices getting stabilised and customers coming and buying products at these price points is visible."

The pick up in residential sales may not be euphoric, but it is indicative of transactions gathering momentum. However, a deal in the retail and commercial verticals remain still lacklustre.

DLF has leased out just 0.25 million sq ft, while HDIL sold 30% of the 1.5 million sq ft of commercial space launched. In some malls, retailers continue to negotiate for cheaper rentals. 

Debt still remains a concern in the balance sheets of realty players. In fact, industry major DLF has had a slight increase in its debt from last quarter. However, all others like Unitech, HDIL, and Sobha Developers who raised funds through a qualified institutional placement has reduced debt. But analysts say it is not enough and companies may have to raise funds before the end of FY10.

Since March, Unitech's debt has fallen about 25% to Rs 6,659 crore. Sobha Developers' current debt-equity ratio stands at 0.88 times as opposed to 2:1 times about five months back. Sarang Wadhawan, MD, HDIL, says, "We have a debt of Rs 3,200 crore which has reduced substantially post the QIP. Our interest cost is around 12% to 12.5%. But because of QIP we are almost saving Rs 200 crore per year."

With the Reserve Bank cracking the whip on bank funding to the sector, asset monetisation will be high on agenda. Sobha Developers intends to raise Rs 500 crore through land sale. DLF has clocked in Rs 450 crore through land deals and the management indicates more is on the anvil. Market analysts estimate a quiet third quarter before the primary markets gear up for further fund raising and initial public offerings.