Unitech Ltd. (507878.BY), one of India’s top realty companies by sales, Wednesday posted a 98% drop in consolidated net profit for the January-March quarter as expensive loans and property prices crimped demand for apartments and shopping malls. Profit in the fiscal fourth quarter plunged to INR22.6 million from INR1.03 billion a year earlier. The figure lagged the INR790 million averages of estimates in a Dow Jones Newswires poll of five analysts. Sales declined 32% to INR7.16 billion from INR10.54 billion.
Unitech and other realty companies in India have been hit by weak demand in a slowing economy. The central bank raised interest rates 13 times between March 2010 and October 2011, before finally easing rates this April. Also, rising living costs and reluctance of most realty companies to make major cuts in prices have made potential buyers put off purchases. Unitech’s net profit for the financial year ended March 31 fell 56% to INR2.48 billion. Sales declined 23% to INR24.46 billion.
“Financial year 2011-12 was a very challenging year, particularly in terms of availability as well as cost of funding for real estate projects,” said Ajay Chandra, Unitech’s managing director. “This has resulted not only in an increase in financing costs for the company, but also adversely affected construction activity.” Chandra said, however, that he expects the current financial year to be “significantly better” as there has been a gradual improvement in availability of funding in recent months. Also, interest rates are expected to come down.
He said Unitech plans to deliver nearly nine million square feet of space in this financial year which began on April 1, up from last year’s 3.4 million square feet. The guidance will be helped by Unitech receiving bookings for 7.19 million square feet in the past financial year — including 6.34 million square feet of residential bookings — totalling INR38.08 billion. The company launched projects of 7.81 million square feet last year.