Real Estate: How does the market look for builders in Quarter 4

 

According to the HDFC Securities Research firm, collective revenue for the sector during 4QFY19E could grow 11.2 percent with APAT at 28.1 percent year-on-year growth and EBITDA (Earnings before interest, taxes, depreciation, and amortization) at 32.8 percent rise. Factoring these figures in with the ongoing condition of real estate, the firm speculates a bad performance from Prestige Estates due to their recent price performance while the future looks positive for Sobha Developers, Oberoi Realty, DLF, Brigade Enterprises, and Kolte-Patil Developers.

This comes after the Nifty index gain of 33.6 percent in the last six months and 12.9 percent in the last 3 months. Majorly possible due to the partial ease of Non-Banking Financial Company (NBFC) liquidity, even the real estate prices shifted towards the economical, and affordable, side with the clarification of GST input rules by the government after the introduction of composite rates.

As for the upcoming scenario, although NBFC has observed reasonable ease in liquidity tightening, they are expected to face turbulence. Following the impact, a shift towards banks and bank-sponsored NBFCs is on the card, which would further impact the reputed builder with rigid rates and limited supply.

On the other hand, organized builders and homebuyers stand to make reasonable profits. While the former could gain market shares if they have direct banking lines, latter will enjoy a reduced tax burden due to GST rate shift of 1 percent on affordable housing and 5 percent on other property types.

The analysis by HDFC firm further states that the retails of Original Equipment Manufacturers (OEMs) have taken a substantial hit due to three major factors: restricted finance availability, unseasonal weather as well as higher insurance cost. As a result, they had to destock the inventory and reduce production to maintain the market demand-supply curve.

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