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Indian developers post plunging profits

DLF Ltd and Unitech Ltd, India's biggest property developers, said quarterly profits plunged to record lows as the deepest economic slump in six years damped demand for homes, offices and malls.

Net income fell 69 percent to 6.71 billion rupees (US$137 million) in the three months to December 31, DLF reported, missing the 15.9-billion-rupee median estimate of analysts in a Bloomberg News survey. Unitech profit slid 74 percent in the same period to 1.36 billion rupees, short of analysts' 3-billion-rupee forecast.

Steeper-than-expected slides in earnings at the New Delhi-based companies underscored the mounting financial challenges the nation's real estate sector faces, with developers caught between a cash crunch and dwindling demand. An equities slump and the global credit contraction choked funding as property purchases slowed following a six-year rally in prices.

"Real estate companies are in a catch-22 situation where getting money incrementally is difficult," said Jayesh Shroff, who helps manage US$2 billion in equities, including DLF, at SBI Asset Management in Mumbai. "They'll have to push for higher sales."

DLF's sales fell to 13.7 billion rupees during the quarter from 36 billion rupees a year earlier. That compared with a 33.7-billion-rupee median estimate of analysts. Sales at Unitech fell to 4.9 billion rupees, compared with the 8.79 billion rupees forecast by Bloomberg analysts.

"We expect this painful adjustment to continue for at least the next two quarters," Sameer Baisiwala, an analyst at Morgan Stanley in Mumbai, wrote in a report last Friday.

Housing prices fell as much as 40 percent in parts of Mumbai during the quarter to December 31. Prices in Delhi dropped about 8 percent.


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