Is DLF’s decline an ominous sign?

It is becoming increasingly evident that the second-quarter earnings at DLF Ltd, India’s globally acclaimed real estate developer, will decline from a year ago since improving home sales haven’t been enough to trigger a pickup in profit. It has been learnt that developers have no other way but they do need to see a retrieval in the commercial segment to confirm better numbers. The figures, however, are better than those in the preceding quarter, signaling that demand has returned and financial restructuring has helped.

In accordance with experts, the real estate sector went into a slump after a liquidity crunch gripped the Indian economy and this made the economy slow and deterring buyers as access to loans dried up. Real estate developers have launched cheaper homes to revive residential property sales.

Let’s check our facts with DLF then. It has been found that DLF is likely to post a 77.11% drop in net profit to Rs442.98 crore and a 53.86% fall in revenue to Rs1,727.62 crore in the three months to September, based on a poll of five brokerages—Edelweiss Securities Ltd, Citigroup Global Markets India Pvt. Ltd, India Infoline Ltd, Motilal Oswal Financial Services Ltd and IDFC-SSKI Research. That would mark an 11.86% increase in net profit and a 4.71% increase in revenue from the preceding quarter.

What is the reason behind this reduction? As indicated by a report by India Infoline, the drop in DLF’s earnings is mostly due to a decline in contribution from the earnings of DLF Assets Ltd (DAL) due to weak commercial prices

DAL is a company owned by the promoters of DLF and used to pay money for the realty firm’s completed assets, used to account for up to 40% of the listed realtor’s revenues until December. DLF expects to report earnings on 29 October, according to a company filing on the Bombay Stock Exchange.