Realtors must improve cash flow, trim debts: Knight Frank

To bring investors back into the market, realty players will have to focus on improving their cash flow position and reduce debt among others, consulting firm Knight Frank said.

Poor performance by realty companies, reflected in their share price, indicates a lack of interest by investors towards the sector, the leading property consultant said in a report here today. The BSE Realty Index dropped by more than 36% in the last one year compared to a near 25% fall in the Sensex, it said.

"To bring back the enthusiasm of investor community into the sector, real estate companies will have to focus on factors such as improving cash flow position, lowering inventory, reducing debt and increasing profit margins," the report said. It said the performance of realty firms in terms of profit in the last few quarters was very poor.

During the December quarter, the year-on-year profit growth has been negative 45% despite revenues falling by only 13%, while margins dropped to 14% during the quarter from 22% a year ago.

According to the study, the Y-o-Y revenue growth has been steadily falling since March 2010 and for the first time in over two years growth has been negative. Revenues for December quarter fell 13% to Rs 5,700 crore from Rs 6,500 crore a year ago. The drop in revenues has been because of the combined effect of falling prices and a slowdown in sales volume, it said.