NRI Real Estate Scenario in South India

Southern India based real estate companies are represented by five companies in our set of 25 real estate companies. South India based companies are pioneers in disseminating informationconsistently to all the stake holders, hencewe have sales volume data for all the five listed real estate companies. Primarily these companies cater to Bengaluru, Chennai, Hyderabad and Kochi real estate markets.The Southern India real estate market is the most stable when compared to other regions. Despite the continued worsening scenario of the real estate market across India, companies based in this regionstand-out as outliers. Affordable prices and end-user driven market made the real estate market here the most sought after affordable option for the middle-income group. The sales volume remained buoyant for South India based real estate companies reporting growth in almost all the past eight quarters. For the current quarter it booked sales to the tune of 3.92 mn.sq.ft. as against 3.76 mn.sq.ft. In Q3FY13, thereby registering a growth of 4%

Affordable prices, an end-user driven market and comparatively less leveraged balance sheets led to a relatively better performance by the developers based in South India

The South India based real estate companies offer the only respite in the current tepid environment. Aggregate revenues for the south India based real estate companies exhibited positive growth on a Y-o-Y basis in each of the past eight quarters. Affordable prices consistently lured end-users to this region, sales booked brought in the much needed funds to fuel the construction activity. An increase in sales volume along with increase in revenue implies growth in construction activity. This can be concluded by change in prices in this region, which grew by 10% in Chennai and 17% in Bengaluru during the past eight quarters.However, unlike sales volume the region could not decouple itself from the rise in input cost. In the last eight quarters, operating profit for the first time has reported a decline in Q3FY14. It has fallen marginally by 5% to `4.75 bn. as against `4.98 bn. in Q3FY13. Moreover, stable prices and increase in input cost adversely impacted operating profit margins. OPM has declined in each of the last six quarters and now stabilised between 30-33%.Although South India based realty companies reported a bit dismal performance on the operating levels, it has been successful in sustaining its net profit as well as net profit margins. Net profit have never reported a decline in each of the previous eight quarters. In the current quarter net profit grew by 25% on a Y-o-Y basis to `1.76 bn. A relatively less leveraged balance sheet worked in favour of this region's real estate companies. This consequently had a positive impact on the net profit margins too, which has now stabilised at 12-14% level.