India’s top realty developers overcome downturn challenges

V Nagarajan

India’s top nine real estate (realty) developers listed at the stock exchange have beaten the housing sector’s downturn blues.
Their financial year (FY) 2019 data reveals that they not only successfully weathered the slowdown period of financial year 2016-17 with a 159 per cent jump in housing sales but also surpassed the market’s peak years of FY 2014-15 by 63 per cent.

The total sales value achieved by these players in FY 19 was approximately Rs228 billion, according to Anarock survey. The top listed developers considered for analysing trends include DLF Ltd., Sobha Ltd., Puravankara Ltd., Prestige Estates, Brigade Enterprises Ltd., Mahindra Lifespace Developers Ltd., Godrej Properties Ltd., Oberoi Realty Ltd. & Kolte Patil developers.

Anarock research reveals that these companies together sold approx. 44 million sq. ft. of housing in FY 2019 as against approx. 17 million sq. ft. in FY 17 (DeMo period) and 27 million. sq. ft. in FY 15.

Their sales have collectively grown by 63 per cent since the housing market’s peak years of FY 15. The housing space sold by the nine listed firms in Q1 of FY 20 (April-June) was nearly 17.5 million sq. ft. in a single quarter - slightly less than half of the total space sold in all four quarters of FY 19. While the data for the three quarters of this financial year is still underway, we can expect sales to be much higher.

An analysis of the new launch data trends of these nine listed real estate developers reveals that their new housing supply has more than doubled in two years — from approx. 28 million sq. ft. in FY 17 to approx. 61 million sq. ft. in FY 19. In the market’s peak year of FY 15, their new launches amounted to nearly 46 million sq. ft.

This translates into a growth of 33 per cent in FY 19 over FY 15. Many developers who incurred massive debts during the sector’s boom period are now looking to reduce their debt burden with rebooted business strategies.

They are either selling their assets or their development rights, refinancing loans or speeding up project completions to improve sales.
While many players continue to struggle, the top 9 listed firms collectively reduced their debt burden by 8 per cent in FY 19 as against FY 17. The collective debt of these 9 listed firms has reduced from INR 19,123 crore in FY 17 to INR 17,508 crore as on FY 19.
 
Q: My father died recently and I inherited the property in India. What will be the tax implication of inheriting and selling the property and repatriating the sale proceeds? Prakash Mehra, Sharjah.

Any property received in India under inheritance is not taxable in India. However, the income arising from transfer will be taxable. If the immovable property is held for more than two years, it will be treated as long-term asset. The holding period would be computed from the date of acquisition by your father. Long-term capital gain is taxable at 20 per cent after the index cost of acquisition. The long-term capital gain will be exempt if it is reinvested in another house or in specified bonds in India.

Q: Can I let my apartment to a foreigner in India? Is it permissible under law? Please advice. M R Prakash, Dubai

A foreign national of non-Indian origin can take on lease residential property in India. But the period of lease should not exceed five years. In such cases, there is no requirement of taking any permission or reporting to Reserve Bank. It is in order for you to let out your apartment to foreigners of non-Indian origin for a lease period not exceeding five years.

Q: I have residential and commercial units in Bengaluru. Can I mortgage the units to raise short-term funds? Is RBI permission required? Mathew Varghese, Dubai.

NRIs/PIOs can mortgage a property to an authorised dealer or housing finance institution in India without the need to obtain the approval of Reserve Bank of India. However, there is one exception. In case it is mortgaged to a party abroad, then RBI’s prior approval would be necessary.