Realtors shifting focus to affordable housing projects?

It has been 8 quarters and the beating the Indian real estate sector has been taking has just not stopped. With the volumes dropping 43 percent over the period, companies, especially the 25 listed ones, have taken it on the chin and so have their investors.

Projects have been delayed along with the cost of funds having risen sharply adding to already high debt levels with the buyer interest being low. For the Indian real estate sector, the hits just keep on coming.

According to Knight Frank India, property demand in North India, which houses big names like DLF , Unitech , and Jaypee Group have taken the hardest hit.

In the third quarter alone, sales volumes are down 57 percent Y-o-Y. This has led to profit growth dwindling to a meager 6 percent in the third quarter, against 15 percent a year ago.

Over the last 8 quarters since the slowdown began, despite the slipping volumes, developers in the region have not been able to slash prices with residential property prices having gone up 21 percent.

Western India, which has 13 listed players in the fray, has not fared any better.

Sales volumes have dropped 36 percent in the third quarter on a Y-o-Y basis and profit growth is down to 16 percent from 22 percent.

The reason for the same mainly is unaffordability. Over the last 8 quarters in this region, the average price of residential property has jumped 16-17 percent.

Players based in South India like Puravankara , Sobha , and Prestige have fared better.

Sales volumes are up 4 percent in the third quarter, and net profit growth stands at 12 percent, against 10 percent a year ago.

Prices in Chennai have risen 10 percent while prices in Bengaluru are up 17 percent over the last 8 quarters.

But for the 25 listed real estate companies and their investors, none of this is good news .

Knight Frank says players, especially those operating in the tougher markets like north and west India, will be forced to shift their targeted milestones by at least 2-4 quarters. Also, high costs and low demand may see developers shifting focus to affordable housing projects, where margins are narrow.

By the time the dust settles, only the companies with a less-leveraged balance sheet may survive.