“People are now secure enough to invest in residential housing” as companies have eased up on cutting workers, Rajeev Talwar, executive director at DLF, said in an interview with Bloomberg-UTV. “There is no danger of a price bubble, or prices increasing or galloping as they did in 2005, ‘06, ‘07.”
Prices in India are lagging behind gains in Asia after developers revived stalled construction projects and companies resumed hiring. India’s central bank on Oct. 27 ordered lenders to set aside funds to cover defaults on loans to property companies, joining authorities in Hong Kong, South Korea and Singapore in trying to rein in prices.
“We fear many” residential projects are running behind schedule, Anubhav Gupta, an analyst with Kim Eng Securities India Pvt. in Mumbai, who rates the stock as a “sell,” said in a note to clients today. “We estimate that the company has inventory of 200 billion rupees ($4.2 billion) available for sale countrywide.”
Homes sales in India may rise between 5 percent and 10 percent, boosting prices by about 3 percent, Talwar said, without providing a timeframe.
Prices of luxury homes in parts of New Delhi, the nation’s capital, are down 20 percent from a year earlier, according to Cushman & Wakefield Inc.
DLF, the second-worst performer on the Bombay Stock Exchange Realty index this year, has gained 25 percent, lagging behind the 62 percent growth in the benchmark Sensitive Index. It fell 3.2 percent to 353.5 rupees at 1 p.m. in Mumbai.
Demand for Offices
DLF’s profit declined for a fifth straight quarter after demand for property slumped as India’s $1.2 trillion economy expands at an estimated 6 percent in the year ending March 31, the slowest pace in seven years. The company expects demand for offices to revive after growth accelerates, Talwar said.
“We have to sustain growth between 7 to 9 percent a year before we see the commercial sector really coming up in demand,” Talwar said. Until then, “supply is going to hold on and retail will only come up much, much later after that.”
Gurgaon, India-based DLF has slowed construction of 27 million square feet of office and retail space, the company said in its annual report in July. More than 70 percent of new projects will be in the residential sector, with offices accounting for 16 percent, according to the report.
To reduce speculative purchases, India’s central bank last month ordered lenders to set aside more funds to cover defaults on loans to property companies. In Hong Kong, the city’s central bank on Oct. 23 tightened down-payment requirements for luxury homes for the first time since 1991.
DLF is selling its so-called “non-core assets” and reducing debt to improve profitability. The company aims to sell assets and recover dues valued at 50 billion rupees ($1.1 billion) this year, Talwar said.
Profit for the three months ended Sept. 30 plunged 77 percent, missing the 4.9 billion rupee median estimate of five analysts surveyed by Bloomberg.
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