High debt inventory, low absorptions challenge for realty

KR Choksey has come with its September quarterly earning estimates for real estate sector. According to the research firm, thigh debt levels, falling absorptions and high inventory remain a challenge for the sector. DLF and Sobha Developers have rallied by 10-15% in recent months.

Real Estate - Sector witnessed strong buying interest on the back of anticipated recovery in Indian real estate market, due to strong policy reforms in land acquisition bills coupled with expectation of decline in interest rate cycle, going forward. Most of the stocks sharply jumped in past 1 month, mainly due to value buying. However, high debt levels, falling absorptions and high inventory remain a challenge for the sector. Most of the companies trying to curb its debt by monetizing its core assets and fund its existing projects. Going forward, it would be very interesting to see the full year guidance and strategy of new launches due to upcoming festive seasons where most of the players witnessed strong sales volumes. The stocks under our coverage i.e. DLF and Sobha Developers rallied by 10-15% in recent months.

Factors to watch in the Q2FY13 result

• No. of new launches and offerings due to upcoming festive season
• DLF- Divestment plan of non-core assets

Top Pick: Sobha Developers