The year gone by has been a mixed bag – as far as the performance of real estate stocks are concerned. While stocks of DLF and Oberoi Realty gave handsome returns of 46 per cent and 33 per cent, respectively, in the last one year, Prestige Estate (-8 per cent) and Sobha Developers (-11 per cent) were a drag – with stock prices ending lower during the year.

It was another tough year for the real estate builders – with sales of residential housing units continuing to remain weak. Net sales was down 10 per cent in the six months period ending September 2016 compared to the year ago. During the period, Godrej Properties witnessed a 62 per cent drop in its sales. Prestige Estate and DLF recorded sales decline of 33 and 11 per cent, respectively.

With the advent of demonetisation, the sector is expected to witness a tough period – at least for the next two forthcoming quarters. Real estate has been the most affected sector from the process of demonetisation – roughly affecting 10 per cent of its overall market. Oberoi Realty, however, bucked the trend with its sales growing 43 per cent y-o-y for the six-month period ending September 2016. With its projects mainly in Mumbai – its sales figures were relatively better. Also, many of the top players saw a massive fall in net profit over the six-month period ending September 2016 on a y-o-y basis – to the tune of 50 per cent or above. While DLF’s net profit was down by 51 per cent after adjusting for extra-ordinary items, net profit of Godrej Properties and Prestige Estate were down by 53 per cent and 58 per cent, respectively. Oberoi Realty – again bucked the trend, thanks to its healthier financials – be it low debt to equity levels or high operating margin, as compared to its peers. Many of the real estate companies are considerably leveraged. And with sales showing no signs of picking up momentum, their profitability has taken a beating.

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