Angel Broking has come with its quarterly earning estimates on real estate sector for March 2012. The research firm expects, stability in residential prices with the exception of certain micro markets, where prices have overheated.
For 4QFY2012, we expect residential volumes to report negative to flat growth on a sequential basis on account of weak demand due to high interest rates and elevated property prices. Revenue of real estate companies is expected to be largely driven by sale of plotted land and execution of existing projects, though execution delays remain a cause of concern. Companies such as DLF are expected to continue to see sustainability in office-leasing volumes on a sequential basis. Accordingly, we believe commercial rentals have bottomed out, and we do not foresee any material uptick until inventory levels come down.In our universe of stocks, we expect DLF's revenue to be largely driven by the sale of plotted properties in Gurgaon. For ARIL (Anant Raj Industries), we expect revenue to be driven by the residential segment and rental income. HDIL is expected to report flat growth qoq in Transfer of Development Rights (TDR) volumes and prices, given the low inventory of TDRs left on account of earlier stoppage of the MIAL project, which has restarted but the company does not foresee any material uptick in the generation and sale of TDR.Outlook and ValuationIndia's Realty Index is currently ruling near its life-time low seen in 2008. However, things are much better than 2008 with respect to project visibility, cash flow, net debt-equity and growing disposable income. Further, refinancing of loans from the banking sector will give some respite to developers in the declining volume scenario. Having said that, we believe absorption and not price appreciation will drive residential growth over the next six quarters. Amidst this scenario, new launches have been more rewarding for developers who have launched projects at 10-15% discount to prevailing market rates. Further, high inventory is still hampering commercial recovery, though there has been an uptick in absorption levels. We expect rentals to remain firm at current levels with an uptick likely over the next 12 months. We believe stock performances are related to macro factors interspersed with company-specific issues such as the CCI penalty on DLF and 2G-related issues for Unitech. We are positive on the long-term outlook of the realty sector, taking into account growing disposable income, shortage of 25mn houses in India and reasonable affordability. Given the current scenario, we expect stability in residential prices with the exception of certain micro markets, where prices have overheated, and expect an uptick in the commercial and retail segments over the next 12 months.| Company | Net Sales | Net Profit | ||
| 4QFY12E Rs (Cr) | % Chg | 4QFY12E Rs (Cr) | % Chg | |
| ARIL | 177 | 179.2 | 54.8 | 78.8 |
| DLF | 2,382 | -11.2 | 445.7 | 29.4 |
| HDIL | 601 | 14.8 | 197.3 | 0 |
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