Implementation of Rera and GST has continued to elongate the sales cycle
Karan Choudhury | New Delhi August 12, 2017 Last Updated at 22:13 IST
DLF Limited has reported a decline of 58 per cent in its consolidated net profit at Rs 109.01 crore for the quarter ended June, as India’s largest realty firm has been buffeted by the enforcement of the Real Estate Regulation and Development Act (Rera) and the goods and services tax (GST), leading to absolutely no sale of residential properties since this May.
However, according to sources, DLF might get some relief as the 40 per cent stake sale of DCCDL (DLF Cyber City Developers Ltd) for Rs 13,000 crore to an affiliate of Singapore’s GIC might be complete later this month. DLF’s net profit stood at Rs 261.85 crore in the year-ago period, the company said in its BSE filing. The total income, however, rose by nine per cent to Rs 2,211.24 crore in the first quarter of this fiscal from Rs 2,025.58 crore in the corresponding period of the previous year.
The profits have declined as the company had posted an exceptional profit of Rs 329.11 crore in the year-ago period. According to industry insiders, as the mid to high segment of residential properties have not been able to find buyers in the last few quarters, the profits of companies such as DLF have taken a severe hit.
“There has not been a single sale of a residential property since May this year. There is a lot of ambiguity in the market. The industry is still adjusting to Rera, GST and even the after affects of demonetisation are still visible. It will take time for DLF to get back on track in the residential segment,” said a source close to the company.
The company said uncertainty in operations continued in the industry as each state government followed a different time-table for adoption of the central law, including the subsequent enactment of the rules.
“The introduction of GST, from July 1, also added to the uncertainty resulting in elongation of sales cycle. Back-end integration challenges continued as it was dependent upon the timing of the GST registrations of the vendors also. The company is fully compliant with the GST regime. Despite growth in the economy, the demand for residential real estate continues to be soft,” the company said.
Implementation of Rera and GST has continued to elongate the sales cycle. The company expects the sector would achieve normalcy over the next two-three quarters. With reduction in benchmark interest rate by the Reserve Bank of India this month and markets guiding towards further softness in interest rate, the sector should witness a recovery soon. The company said that it shall have a healthy pipeline of finished inventory for sale in the foreseeable future when the demand returns.
Also, DLF is set to get some breather as according to sources, the stake sale to GIC would be complete possibly by end of this week. In March DLF decided to sell 40 per cent of DCCDL for Rs 13,000 crore to an affiliate of Singapore’s GIC. The company has been getting a number of regulatory approvals for the last few weeks. Sources said GIC had completed its due diligence.
“The transaction for sale of CCPS in DCCDL is in advanced stages of discussion. The demand for office leasing space continues to be good. Development of two new towers in Chennai SEZ is expected to be completed in FY18 while development of Cyber Park, Gurgaon, is expected to be completed in FY19,” the company added.