Bangalore real estate sees sharp price correction
24 Jun 2013
2 Min Read
CW Staff
India's regions that have seen sharp price correction in recent years such as Bangalore saw strong pickup in demand for residential housing as buyers cashed in on affordable prices. Real estate developers showed signs of bouncing back in 2012-13 after a difficult 2011-12.
National Housing Board鈥檚 Residex index showed that prices in the Bangalore market are on the rise, in the last three quarters. Mumbai and NCR also recorded higher prices according to the NHB index, but demand remained subdued.Growing debt and stretched finances on account of interest payments have dogged many real estate players in recent years, but the problems now seem to be abating.
Debt levels stabilised and most builders showed interest expenses tapering off towards the year-end. In the first quarter of FY13, interest expense increased by over 23 per cent on aggregate, over the same period the previous year. In the last quarter of FY13, expense, however, decreased by around 3 per cent compared with last year.
Players such as Unitech and Mahindra Lifespace Developers saw an over 20 per cent decline in interest payouts in the March quarter from December. In FY12 in contrast, interest costs had increased throughout the year. While borrowing rates for developers have not fully reflected the rate cuts by RBI, players managed to save on costs by reducing unsold inventory of property and refinancing high cost debt.
DLF, for instance, sold parcels of land and other non-core assets to raise cash and lighten its debt burden. Margins, however, came under pressure. Barring a few exceptions, most listed players witnessed a dip in operating and net margins compared with last year. DLF鈥檚 profit margin dropped as the company adopted more conservative accounting policies in line with new standards.
India's regions that have seen sharp price correction in recent years such as Bangalore saw strong pickup in demand for residential housing as buyers cashed in on affordable prices. Real estate developers showed signs of bouncing back in 2012-13 after a difficult 2011-12.
National Housing Board鈥檚 Residex index showed that prices in the Bangalore market are on the rise, in the last three quarters. Mumbai and NCR also recorded higher prices according to the NHB index, but demand remained subdued.Growing debt and stretched finances on account of interest payments have dogged many real estate players in recent years, but the problems now seem to be abating.
Debt levels stabilised and most builders showed interest expenses tapering off towards the year-end. In the first quarter of FY13, interest expense increased by over 23 per cent on aggregate, over the same period the previous year. In the last quarter of FY13, expense, however, decreased by around 3 per cent compared with last year.
Players such as Unitech and Mahindra Lifespace Developers saw an over 20 per cent decline in interest payouts in the March quarter from December. In FY12 in contrast, interest costs had increased throughout the year. While borrowing rates for developers have not fully reflected the rate cuts by RBI, players managed to save on costs by reducing unsold inventory of property and refinancing high cost debt.
DLF, for instance, sold parcels of land and other non-core assets to raise cash and lighten its debt burden. Margins, however, came under pressure. Barring a few exceptions, most listed players witnessed a dip in operating and net margins compared with last year. DLF鈥檚 profit margin dropped as the company adopted more conservative accounting policies in line with new standards.
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